When the economy experiences a general decrease in demand, what happens to the price and quantity of goods in that economy?

In an economy where there is a general decrease in demand, the correct understanding is that both the equilibrium price and quantity of goods will decrease. When demand falls, it indicates that consumers are less willing or able to purchase goods at the current prices. This shift in demand leads to a surplus of goods in the market, as suppliers are still offering the same amount of products, but there are fewer buyers.

To restore equilibrium, suppliers would respond to this surplus by lowering prices to attract more consumers, which, in turn, reduces the overall quantity produced and sold in the market. As a result, both the price and the quantity of goods in the economy will decrease, reflecting the new lower level of demand. This outcome illustrates the basic principles of supply and demand: when demand decreases, the corresponding price level and quantity produced must adjust downward to achieve a new market equilibrium.