Answer:
When the market is in equilibrium, this implies that the market demand is equal to the market supply at the equilibrium point. Now, in case the market supply decreases, this leads to a leftwards shift in the market supply curve. This is because a decrease in supply refers to a fall in the supply of the given commodity due to change in factors other than price, thus, in the given case the supply curve will shift towards left. As a result, there will exist a situation of excess demand at the equilibrium point. This can be shown in the following diagram.
As the market supply decreases, the initial supply shifts leftwards to the new supply curve\[{{S}_{1}}{{S}_{1}}\] from\[{{S}_{2}}{{S}_{2}}\]. Now at the initial market price of\[O{{P}_{1}}\]. There exists excess demand. This excess demand will increase competition among the buyers and they will now be ready to pay a higher price to acquire more units of a good. This will further raise the market price. The rise in the price will continue till the market price becomes\[O{{P}_{2}}\]. The new market supply curve intersects the initial demand curve. The total quantity supplied will fall to \[O{{Q}_{2}}\] and the new equilibrium price will rise to\[O{{P}_{2}}\].
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