8. In a competitive market, what happens to price and quantity when the supply of a good decreases?
a. The price increases and the quantity decreases.
b. The price increases and the quantity increases.
c. The price decreases and the quantity decreases.
d. The price decreases and the quantity increases
a. The price increases and the quantity decreases.
In a competitive market, when the supply of a good decreases, the correct answer is:
a. The price increases and the quantity decreases.
When the supply of a good decreases, there are less goods available to meet the demand from consumers. This leads to a higher price as suppliers can charge more for each unit of the good. Additionally, the decrease in supply also leads to a decrease in the quantity available in the market.
To answer this question, we need to understand the relationship between supply and price in a competitive market. In a competitive market, the supply of a good refers to the quantity of that good that producers are willing and able to sell at various prices.
When the supply of a good decreases, it means that producers are offering less quantity of the good for sale at any given price. As a result, the relationship between supply and price can be explained by the law of supply, which states that as the price of a good increases, producers are willing to supply more of that good.
Therefore, when the supply of a good decreases, it implies that at any given price, there will be a lower quantity of that good available in the market. This leads us to the correct answer for the question:
a. The price increases and the quantity decreases.