Bad reviews shift demand left, lowering equilibrium price and quantity

Steps:

• Bad reviews reduce consumer willingness to pay for the hotel's accommodation.
• This shifts the demand curve leftward while supply stays fixed.
• The new equilibrium occurs where the shifted demand intersects the original supply.
• Result: lower price and lower quantity compared to point E.

Why C is correct:

• C shows the intersection of left-shifted demand and unchanged supply, following the law of supply and demand where decreased demand lowers equilibrium price and quantity.

Why the others are wrong:

• A: Indicates higher price and quantity, which would require a rightward demand shift, not bad reviews.
• B: Suggests no change in equilibrium, ignoring the demand shift from reviews.
• D: Implies lower quantity but higher price, which occurs with a supply shift, not demand.

Final answer: C