If the supply curve is perfectly elastic, then an increase in demand results in no change in the
A)equilibrium quantity but a large increase in the equilibrium price.
B)equilibrium quantity but a large decrease in the equilibrium price.
C)equilibrium price but a decrease in the equilibrium quantity equal to the change in demand.
D)equilibrium price but an increase in the equilibrium quantity equal to the change in demand.
E)equilibrium quantity or the equilibrium price.

Question

Quizplus · Accepted Answer

When the supply curve is perfectly elastic, it means that producers can produce and supply any amount of the good at a fixed price. Therefore, an increase in demand will not result in an increase in price (since supply can easily meet the increased demand without affecting the price), but it will result in an increase in the equilibrium quantity (since producers are willing and able to supply more at the same fixed price). Therefore, the only option that accurately describes this scenario is D.

If the Supply Curve Is Perfectly Elastic, Then an Increase