If there is a fall in the demand of a good, the equilibrium price is expected to:

Correct option is A

Correct Answer: (A) Fall

The law of demand and supply states that when the demand for a good decreases, while the supply remains constant, the equilibrium price falls.

Reasoning:

1. Decrease in Demand → Excess Supply:
   • If demand falls, there will be more supply than required, creating excess stock.
2. Market Adjustment:
   • To clear this excess supply, producers lower prices to encourage purchases.
3. New Equilibrium Price:
   • As price decreases, demand might stabilize at a new lower equilibrium price.

• Graphical Representation: In a demand-supply curve, a leftward shift in the demand curve leads to a lower equilibrium price.
• Example: If people reduce their demand for petrol due to increased public transport use, petrol prices will likely fall.
• Factors Causing a Fall in Demand:
  • Income Decline: Consumers have less purchasing power.
  • Change in Preferences: Shift to substitutes (e.g., electric cars instead of petrol cars).
  • Price of Substitutes Falls: If tea becomes cheaper, demand for coffee may fall.
  • Future Price Expectations: If buyers expect prices to decrease further, they delay purchases.

•  Neither fall nor rise:  Incorrect; equilibrium price falls if demand decreases while supply remains constant.
• Rise:  Incorrect; a fall in demand reduces price, not increases it.
•  First rise, then fall sharply:  Incorrect; no reason for a temporary price increase when demand declines.