Question

Explain the effect of decrease in supply when (i)demand is perfectly elastic(ii) demand is perfectly inelastic ​

Answer 1

Answer:

When demand is perfectly inelastic, a decrease in supply leads to a leftward shift in supply curve but the demand curve remains the same. Fall in supply leads to an increase in prices but the equilibrium quantity does not change since the demand curve is vertical or perfectly inelastic.

Answer 2

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