If a good has a perfectly inelastic short-run supply curve, an increase in demand will:
A)increase the price and quantity exchanged in the short run.
B)increase the price and but leave the quantity exchanged the same in the short run.
C)increase the quantity exchanged but leave the price the same in the short run.
D)leave both price and quantity exchanged the same in the short run.

Question

If a good has a perfectly inelastic short-run supply curve, an increase in demand will:
A)​increase the price and quantity exchanged in the short run.
B)​increase the price and but leave the quantity exchanged the same in the short run.
C)​increase the quantity exchanged but leave the price the same in the short run.
D)​leave both price and quantity exchanged the same in the short run.

Quizplus · Accepted Answer

If the short-run supply curve is perfectly inelastic, it means that the quantity supplied cannot be increased in the short run, regardless of the increase in demand. Therefore, the only way to clear the market is by increasing the price to the point where the demand equals the fixed quantity supplied. As a result, an increase in demand will lead to an increase in price, but the quantity exchanged will remain the same in the short run.

If a Good Has a Perfectly Inelastic Short-Run Supply Curve