Explain with the help of a diagram effect of leftward shift of demand curve (decrease in demand) on equilibrium price.
Effect of leftward shift of demand curve (decrease in demand). Briefly when demand curve shifts leftward, i.e. when demand decreases, equilibrium price as well as quantity sold (i.e., supply) also fall as shown in given Fig How? It is explained with chain effects.
Decrease in demand shifts the demand curve from DD to D2D2 leading to short demand EF2 at the given price OP.
Since firms will not be able to sell all what they want to sell, there will be competition among sellers leading to fall in price.
As price falls, demand starts rising (along D2D2) and supply starts falling (along SS) as shown by arrows in Fig.
This change will continue till demand and supply are equal at new equilibrium point E2.
Price falls from OP to OP2 and supply falls from OQ to OQ2.
