Question

How do changing prices affect supply and demand? As price increases, both supply and demand increase. As price decreases, both supply and demand decrease. As price increases, supply decreases, but demand increases. As price decreases, supply decreases, but demand increases.

Answer 1

Therefore, a decrease in demand reduces BOTH EP and EQ. The new intersection of the supply and demand curves is located at a lower equilibrium price, but at a higher equilibrium quantity. Therefore, an increase in supply reduces EP and increases EQ. ... Therefore, a decrease in supply increases EP, but decreases EQ.......

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