In a standard supply-and-demand model, a decrease in supply means:

• A. At each price, firms are willing and able to sell a smaller quantity than before (the supply curve shifts left).
• B. A movement down along the existing supply curve caused by a decrease in the good’s price.
• C. A movement up along the existing supply curve caused by an increase in the good’s price.
• D. At each price, firms are willing and able to sell a larger quantity than before (the supply curve shifts right).

Answer: (A)

Verified step by step guidance

1. Understand the difference between a movement along the supply curve and a shift of the supply curve. A movement along the curve happens when the price changes, holding other factors constant.
2. Recognize that a decrease in supply means that at every given price, the quantity that firms are willing and able to sell decreases. This is represented by a leftward shift of the supply curve.
3. Recall that a movement down or up along the supply curve corresponds to changes in quantity supplied due to price changes, not changes in supply itself.
4. Identify that a decrease in supply is not the same as a decrease in quantity supplied; the former shifts the entire supply curve, while the latter is a movement along the curve.
5. Conclude that the correct interpretation of a decrease in supply is: 'At each price, firms are willing and able to sell a smaller quantity than before (the supply curve shifts left)'.