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Market Equilibrium — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsMarket Equilibrium4 Marks
Question
What would be an effect on equilibrium price and equilibrium quantity if demand and supply both fall at the same rate?
OR
Market for a good is in equilibrium. There is simultaneous "decrease" both in demand and supply but there is no change in market price. Explain with the help of a schedule how is it possible.
✓

Answer

When demand and supply both decrease at the same rate, equilibrium price remains constant and equilibrium quantity falls. It can be shown with the help of the following diagram.

In the given diagram price is measured on vertical axis and quantity demanded and supplied is measured on horizontal axis. Initially, the equilibrium price is $OP$ and equilibrium quantity is $OQ$. But as given in the examination problem, "demand and supply both decrease at the same rate”, then,
  1. Equilibrium price remains constant Beat $OP$.
  2. quilibrium quantity falls from $OQ$ to $OQ_1$.

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