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.

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.

Give reasons for the following statements: 1. A decrease in suppl…

Download App

Question

Give reasons for the following statements:

A decrease in supply will not result in a change in equilibrium quantity if the demand for a commodity is perfectly inelastic.
An decrease in supply will not result in a change in equilibrium price if the demand for a commodity is perfectly elastic.

✓

Answer

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.
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.