Thursday, May 15, 2008

A Decrease in Demand

A decrease in demand is represented by a shift of the demand curve to the left.

Ceteris paribus, in the new equilibrium:

Supply is unchanged. (The supply curve did not move.)
Demand has decreased. (The demand curve shifted to the left.)

The quantity supplied decreased to the new equilibrium quantity.
The quantity demanded decreased to the new equilibrium quantity.
The equilibrium price decreased.

Total revenues (price multiplied by the quantity sold) are unambiguously smaller in the new equilibrium.

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