Supply being perfectly inelastic, what will be the effect of increase or decrease in demand on price and equilibrium quantity?

Price increases or decreases respectively.

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No effect on equilibrium quantity.

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Both (a) and (b).

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None of the above

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Solution

The correct option is B Both (a) and (b).
In case of perfectly inelastic demand the change in price will have no effect on the quantity demanded. The consumers do not change their demand due to the change in price. This usually is seen in case of necessities. Hence, the equilibrium quantity will be same the price might increase or decrease.

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Similar questions

Show with the help of a diagram, the effect on equilibrium price and quantity when:
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(ii) Supply is perfectly inelastic and demand increases.
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What will be the effect on equilibrium price and quantity of an increase in equal proportion of demand and supply of a commodity?

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