If the demand curve is perfectly inelastic, 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 inelastic, it means that consumers will continue to buy the same quantity of the good regardless of changes in price. Therefore, an increase in supply will not affect the quantity exchanged. However, since the supply has increased, there is now a surplus of the good, which will drive down the price. Thus, the price will decrease, but the quantity exchanged will remain the same.

If the Demand Curve Is Perfectly Inelastic, Then an Increase