If the demand curve is perfectly elastic, 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.

Question

If the demand curve is perfectly elastic, 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.

Quizplus · Accepted Answer

If the demand curve is perfectly elastic, it means that the consumers are extremely responsive to even the slightest changes in price. Therefore, an increase in supply will lead to a decrease in price, but the quantity exchanged will increase as consumers are willing to buy more at a lower price. Hence, the answer is C.

If the Demand Curve Is Perfectly Elastic, Then an Increase