Question

Suppose the number of buyers in a market decreases and a technological advancement occurs also. what would we expect to happen in the market?
a. equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous.
b. equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous.
c. equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.
d. none of the above is correct.

Answer 1

This is very situational really. It depends on the magnitude of the shift of the two curves, for example, both the quantity and price may change, or one of them will be the same and the other will change. But the answer is A, and there is a long explanation provided below.

Further (and rather advanced) explanation:

If you look at the diagrams that I made, you can see that on the left, if the shift of the supply curve is greater than the shift in the demand curve, then output will increase whereas price will decrease. However, if the shift in the demand curve is greater than the shift in the supply curve, then both the price and output will decrease. Therefore, the decrease in price will happen, but output is rather ambiguous, giving us A.