When demand decreases, what happens to the equilibrium price and quantity?

When demand decreases, it means that consumers are less willing or able to purchase a good or service at the existing price levels. This decline in demand leads to a shift in the demand curve to the left in a typical supply and demand model.

As demand falls, sellers will notice that they have excess inventory or unsold goods because fewer consumers are interested in buying them at the previous prices. In order to encourage sales and reduce this surplus, suppliers are likely to lower the price of the goods. This decrease in price will simultaneously result in a reduction in the equilibrium price.

Alongside the decrease in price, the quantity sold will also fall. The lower price may entice some additional buyers, but overall, the reduced demand means that the total sales volume will decrease.

Thus, when demand decreases, both the equilibrium price and the equilibrium quantity will fall. This aligns with the concept that shifts in demand directly affect both price and quantity, influencing how the market responds to consumer behavior.