Show, with the help of a diagram, the effect on equilibrium price when demand increases and supply is perfectly elastic.

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Solution

When supply is perfectly elastic and demand increases, there will be no change in the price but the quantity demanded increases. In the diagram, when demand increases from DD to $D_{1} D_{1}$ , the price remains constant at OP, but the quantity increases from OQ to $O Q_{1}$ .

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Show, with the help of a diagram, the effect on equilibrium price when demand increases and supply is perfectly elastic.

When supply is perfectly elastic and demand increases, there will be no change in the price but the quantity demanded increases. In the diagram, when demand increases from DD to D1D1, the price remains constant at OP, but the quantity increases from OQ to OQ1.

When supply is perfectly elastic and demand increases, there will be no change in the price but the quantity demanded increases. In the diagram, when demand increases from DD to $D_{1} D_{1}$ , the price remains constant at OP, but the quantity increases from OQ to $O Q_{1}$ .