<p>Draw a demand and supply curve and shift the demand curve downwards.</p>
<p>You will see that the new equilibrium has lower price <strong>and</strong> lower quantity, so although prices are lower (which means that the initial drop in demand is partially compensated), total output nevertheless decreases and therefore the required amount of inputs will also be lower.</p>
<p>So, while firms might lower their prices to increase demand after a drop, they will never do this to the point where demand is equal to the level before the reduction. As a result, output will decrease.</p>

CC BY-SA 4.0
2021-06-10T09:54:14.223Z
2021-06-10T09:54:14.223Z
tdm
<p>When consumer demand reduces, and if companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment during a recession?</p>

CC BY-SA 4.0
2021-06-10T07:17:10.623Z
1. Bring up demand compared to what? Pre-recession demand, or recession demand?
Giskard
CC BY-SA 4.0
2021-06-10T07:17:35.867Z
2. If companies *could* reduce prices, *should* they reduce prices? Is that in accordance with their own interests?
Giskard
<supply-and-demand><unemployment><great-recession>
If companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment
Tim Lee
# If companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment

(Asked by: username_0 on 2021-06-10)

When consumer demand reduces, and if companies could reduce prices to bring up demand during a recession, then why there is less production/output and more unemployment during a recession?

**Tags:** supply-and-demand, unemployment, great-recession

> **Comments:**
> **username_1**: 1. Bring up demand compared to what? Pre-recession demand, or recession demand?  
> **username_1**: 2. If companies *could* reduce prices, *should* they reduce prices? Is that in accordance with their own interests?  

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## 1 answers

### Answer by username_2 on 2021-06-10. Score: 2

Draw a demand and supply curve and shift the demand curve downwards.

You will see that the new equilibrium has lower price **and** lower quantity, so although prices are lower (which means that the initial drop in demand is partially compensated), total output nevertheless decreases and therefore the required amount of inputs will also be lower.

So, while firms might lower their prices to increase demand after a drop, they will never do this to the point where demand is equal to the level before the reduction. As a result, output will decrease.


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