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Which of the following statements is true? -

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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

MCQ

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.

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