If the demand curve is perfectly elastic, then an increase in supply will:
A)increase both the price and the quantity exchanged.
B)increase the price but result in no change in the quantity exchanged.
C)increase the quantity exchanged but result in no change in the price.
D)decrease the price but result in no change in the quantity exchanged.
E)do none of the above.

Question

Quizplus · Accepted Answer

If the demand curve is perfectly elastic, it means that buyers are extremely sensitive to changes in price and will only purchase at a specific price point. As such, an increase in supply will lead to a situation where there is more supply than demand, and sellers will need to lower their prices in order to sell their products. However, since the demand curve is perfectly elastic, buyers will only buy at the same price point as before, resulting in an increase in the quantity exchanged but no change in the price.

If the Demand Curve Is Perfectly Elastic, Then an Increase