For a given decrease in demand, the effect on price is largest and the effect on quantity exchanged smallest when:
A)supply is perfectly elastic.
B)supply is elastic.
C)supply is unit elastic.
D)supply is inelastic.
E)supply is perfectly inelastic.

Question

Quizplus · Accepted Answer

When supply is perfectly inelastic, the quantity supplied does not change regardless of the price, so the entire effect of a decrease in demand is reflected in a change in price.

For a Given Decrease in Demand, the Effect on Price