Question

In the absence of controls on the number of crayfish caught, if both the demand for and the supply of crayfish decrease during the Christmas season, we could expect:

	a.	both the price and quantity of crayfish traded to decrease.
	b.	the price of crayfish to rise, but the quantity of crayfish traded to decrease.
	c.	the quantity of crayfish traded to decrease, but the equilibrium price to either rise or fall, or stay the same.
	d.	the price of crayfish to increase, but the quantity traded could either increase or decrease, or stay the same.

Answer 1

The correct option is c.

(a) With the decrease in the demand and supply of crayfish together, the quantity of crayfish will decrease but price of the crayfish will not change.

(b) With decrease in demand and supply of crayfish simultaneously, there will be no effect on the price of the crayfish. It cannot rise because there is decrease in demand.

(c) Decrease of demand and supply of crayfish together will reduce the quantity of crayfish. But the price will not change. It will remain the same. Decrease in demand might lead to fall in price but decrease in supply will nullify the effect.

(d) Price of crayfish will only increase if there is shortage in supply of crayfish. Simultaneous shortage in demand of crayfish will pull down its price to original level.