Suppose demand is perfectly inelastic, and the supply of the good in question decreases. As a result,
A)the equilibrium price increases, and the equilibrium quantity is unchanged.
B)the equilibrium quantity decreases, and the equilibrium price is unchanged.
C)the equilibrium quantity and the equilibrium price both are unchanged.
D)buyers' total expenditure on the good is unchanged.

Question

Quizplus · Accepted Answer

When demand is perfectly inelastic, consumers are willing to buy the same quantity regardless of the price. If the supply decreases, the equilibrium quantity remains the same (since demand is perfectly inelastic), but the equilibrium price increases due to the reduced supply.

Suppose Demand Is Perfectly Inelastic, and the Supply of the Good