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Market Equilibrium — Economics STD 12 Humanities & Commerce — Question

Rajasthan BoardEnglish MediumSTD 12 Humanities & CommerceEconomicsMarket Equilibrium2 Marks
Question
Give reasons for the following statements:
  1. A decrease in supply will not result in a change in equilibrium quantity if the demand for a commodity is perfectly inelastic.
  2. An decrease in supply will not result in a change in equilibrium price if the demand for a commodity is perfectly elastic.
✓

Answer

  1. If the demand for a commodity is perfectly inelastic, i.e., if the demand curve is a vertical straight line, a decrease in supply curve will result only in a change in the equilibrium price, but no change in the equilibrium quantity.
  2. If the demand for a commodity is perfectly elastic, i.e., if the demand curve is a horizontal straight line, a decrease in supply curve will result only in change equilibrium quantity, but no change in equilibrium price.

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