Concept:Under a downward sloping demand curve and a perfectly elastic (horizontal) supply curve, an exogenous decrease in demand shifts the demand curve leftward, affecting equilibrium quantity but not price.
Explanation:The demand curve slopes downward: as price
P falls, quantity demanded
Qd​ rises, and vice versa.
The supply curve is fully elastic, meaning firms will supply any quantity at a constant price
P0​.
An exogenous decrease in demand (e.g., due to lower income or preference shift) moves the demand curve to the left.
At the original price
P0​, quantity demanded now falls below the original equilibrium quantity.
Since supply is perfectly elastic, producers continue to supply at
P0​ but only the quantity actually demanded.
The new equilibrium occurs at the intersection of the new demand curve and the same horizontal supply curve.
Therefore, equilibrium price remains unchanged at
P0​, while equilibrium quantity
Q decreases to the new lower level.
Thus, only quantity adjusts downward; price does not change because supply can fully absorb the demand shift at the same price.
Answer:Option C: decrease in equilibrium quantity and no change in price.