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Question
With the help of a diagram, show how equilibrium price and quantity of a commodity are affected when supply is perfectly elastic and demand increases.
Diagram
Very Short Answer
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Solution
When supply is perfectly inelastic (a vertical line), a change in demand changes the price, but the quantity stays the same.
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Chapter 6: Market Mechanism: Equilibrium Price and Quantity in a Competitive Market - TEST YOURSELF QUESTIONS [Page 114]
