The graph here shows the effect of a decrease in demand on the market for cheese.

Which of the following statements about the decrease in demand shown in the graph is correct?

Choose 1 answer:
(A) The new equilibrium is $P=P_{X}$ and $Q=Q_{A}$
(B) The new equilibrium is $E_{1}$
(C) The new equilibrium is $P=P_{Y}$ and $Q=Q_{B}$

Question

The graph here shows the effect of a decrease in demand on the market for cheese.

Which of the following statements about the decrease in demand shown in the graph is correct?

Choose 1 answer:
(A) The new equilibrium is $P=P_{X}$ and $Q=Q_{A}$
(B) The new equilibrium is $E_{1}$
(C) The new equilibrium is $P=P_{Y}$ and $Q=Q_{B}$

Accepted Answer

∻Solution∻ ‖ a ⋮ Identifying the New Equilibrium: The new equilibrium occurs where the new demand curve (D2) intersects the supply curve (S1). This intersection is labeled as E2. ‖ ‖ b ⋮ Determining the New Price and Quantity: At the new equilibrium point E2, the price is $P_{X}$ and the quantity is $Q_{A}$. ‖ ∻Answer∻ ⚹ (A) The new equilibrium is $P=P_{X}$ and $Q=Q_{A}$ ⚹ ∻Key Concept∻ ⚹ New Equilibrium Point ⚹ ∻Explanation∻ ⚹ The new equilibrium is determined by the intersection of the new demand curve (D2) and the supply curve (S1), which results in a new price $P_{X}$ and a new quantity $Q_{A}$. ⚹◊What impact does a decrease in demand have on the equilibrium price and quantity in a market for cheese, as depicted in the graph provided?⍭ Generate me a similar question◊

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