Question

I don't understand the answer below of the question, can someone add more details about the answer?

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D. Assume that supply decreases by one unit and demand increases by one unit. What must be true for the equilibrium quantity to remain unchanged? Provide your answer in words. Do not use the parameters in the given problem to state the answer.

ANSWER: The responsiveness of consumers and producers to a change in the price must be equal.

Answer 1

The equilibrium quantity should be unchanged only when there is an equal size is shift in both the demand and supply function and that the relevant elasticity of demand and supply should be equal.

when the supply is decreased by 1 unit at every price the supply curve shifts to the left and the size of shift is 1 unit at every price. When the demand is increased by 1 unit, the demand curve shifts to the right and the size of the shift is 1 unit at every price.

the equilibrium quantity will remain same only when the demand elasticity and supply elasticity are same. this will ensure that for a given percentage change in the price the percentage change in the quantity demanded and quantity supplied is same. This is what we can understand from the responsiveness of consumers and producers.