Decrease in demand - effect on equilibrium price, Managerial Economics

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Decrease in Demand

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At the initial equilibrium price P₁, quantity demanded falls from q₁ to q_d. But the quantity supplied is still q₁ at this price. Hence, this creates excess of supply over demand, and this causes price to fall to a new equilibrium level P₂ and quantity to fall to a new equilibrium level q₂.

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