<p>So I'm pretty new to econ and I have a question on my problem set...</p>
<p>A recession causes a demand for piano lessons to decrease. So the demand curve shifts left but the supply curve stays constant right? Now it's asking "What happens to the price of piano lessons?" </p>
<p>I'm thinking that it stays constant... because the supply curve hasn't shifted. And also in the book, it states that "when quantity supplied exceeds quantity demanded at the current price, the price **tends **to fall." But it doesn't say it has to...?</p>
<p>I'm pretty confused about this so thanks to anyone who can help!</p>
<p>The price would fall. Despite the book not explicitly defining the supply/demand effect upon price, saying it tends to do something implies that it follows through, except if there is a specific reason not to.</p>
<p>It would definitely fall, since the demand curve has shifted to the left. The interception of the demand and supply curve has now gone done vertically (signaling a fall in price) and to the left horizontally (signaling a fall in quantity, which your question doesn't ask, but still good to know).</p>
<p>Think about it this way. The question states that there is a recession and demand has fallen. If demand decreases, then firms have to charge less for their good because they won't make as much money at the previous higher price.</p>
<p>prices goes doooooooooooooown! exogenous change to demand not caused by a variable coming from the model itself (which in this case we have price and quantity)! demand shift left -> equilibrium price goes down -> equilibrium quantity goes down.</p>
<p>In the beginning yes there would be an excess supply, but price would go down (movement along the line roughly speaking) decreasing the excess supply gap. Eventually, a new equilibrium will be reached at a lower price and quantity.</p>