If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to:
A) rise and the equilibrium quantity to fall.
B) rise and the equilibrium quantity to stay the same.
C) fall and the equilibrium quantity to fall.
D) fall and the equilibrium quantity to stay the same.

Question

Quizplus · Accepted Answer

When the supply curve for housing is perfectly inelastic, it means that the quantity supplied does not change regardless of the price. Therefore, if there is a reduction in demand, the equilibrium price will fall, but the quantity will stay the same because the supply curve is vertical (perfectly inelastic), indicating that the quantity supplied is fixed.

If the Supply Curve for Housing Is Perfectly Inelastic, Then