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Question
Which of the following statements is true?
Options
Increase or decrease in demandfor a commodity causes change in its price in case the supply of the commodity is perfectly elastic
Increase or decrease in supply for a commodity does not cause any change in its price in case the demand of the commodity is perfectly elastic
An increase or decrease in demand for a commodity does not cause any change in its price in case the supply of the commodity is perfectly elastic
Increase or decrease in demand for a commodity causes changes in its quantity in case the supply of the commodity is perfectly elastic
Solution
An increase or decrease in demand for a commodity does not cause any change in its price in case the supply of the commodity is perfectly elastic
Explanation:
When the supply curve for a commodity is parallel to the x-axis, and there is an increase or reduction in demand for that commodity, the equilibrium quantity changes, i.e. increases or decreases, but the equilibrium price remains the same.