For a given decrease in demand, the effect on price is smallest and the effect on quantity exchanged largest 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 elastic, the price remains constant regardless of changes in demand, leading to the largest change in quantity exchanged.

For a Given Decrease in Demand, the Effect on Price