If the supply curve is perfectly elastic, then an increase in demand 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 not change the quantity exchanged.

Question

If the supply curve is perfectly elastic, then an increase in demand 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 not change the quantity exchanged.

Quizplus · Accepted Answer

When the supply curve is perfectly elastic, it means that suppliers can produce an infinite amount of the good without any changes in their costs of production. Therefore, they will be willing to supply any quantity at a fixed price. As a result, an increase in demand will only increase the quantity exchanged and not the price since the supply is already meeting the demand at a fixed price.

If the Supply Curve Is Perfectly Elastic, Then an Increase