Market for a product is in equilibrium. Supply of the product 'decreases'. Explain the chain of effects of this change till the market again reaches equilibrium. Use diagram.

Explanation

Decrease in supply leads to a leftward shift in the demand curve. As a result, the competition among the buyers increase leading to an increase in the market price. An increase in price leads to a fall in quantity demanded and an increase in quantity supplied. These changes occur until a new equilibrium is achieved where quantity supplied equals quantity demanded.