If the demand curve for a life-saving medicine is perfectly inelastic, what result will a reduction in supply have on the equilibrium price and equilibrium quantity?
A) The price will rise and the quantity will rise.
B) The price will rise and the quantity will stay the same.
C) The price will stay the same and the quantity will fall.
D) The price will rise and the quantity will fall.

Question

Quizplus · Accepted Answer

If the demand curve for a life-saving medicine is perfectly inelastic, it means that no matter the price, consumers will demand the same quantity of the medicine. Therefore, a reduction in supply will not affect the quantity demanded. However, since there is less supply available, the price will rise to a new equilibrium where the quantity supplied equals the quantity demanded. Thus, the equilibrium price will rise and the equilibrium quantity will stay the same.

If the Demand Curve for a Life-Saving Medicine Is Perfectly