Answer to Question #209766 in Economics for Paballo

Question

Use the diagram below to answer the question.

The diagram depicts a decrease in the demand for pies on a campus. If at the same time there was a rent increase for food outlets on campus, then in comparison with the original equilibrium E, there would be

•  A. a decrease in equilibrium quantity but a price increase.
•  B. an increase in equilibrium price and quantity.
•  C. a decrease in equilibrium quantity but an indeterminate effect on price.
•  D. an increase in equilibrium quantity but a price decrease.

Answer 1

B. a decrease in equilibrium quantity but a price increase.