Cheena was discussing with her friend Meena that if the market for cotton is in equilibrium and suddenly both market demand and market supply decreases. Then what will happen? Meena said “Effect on price will be uncertain.” Is she right? If yes, why? If no, why?

Yes, depends on factors other than magnitude of shift No, depends on magnitude of shift No, depends on factors other than magnitude of shift Yes, depends on magnitude of shift

Yes, depends on magnitude of shift

If decrease in supply is more than decrease in demand, then excess demand leads to increase in price. If decrease in supply is less than decrease in demand, then excess supply leads to decrease in price. If decrease in supply is exactly same as decrease in demand, then no change in price.