What will be the impact on equilibrium price and the equilibrium quality when supply is prafactly elastic and demand increase
Answers
If the market supply is perfectly elastic,then increase in demand will not affect the initial equilibrium price but the equilibrium quantity will increase.
Explanation:
In a market scenario where the market supply is perfectly elastic,the suppliers or sellers are willing to supply any quantity or amount of the product or service at a fixed or constant price.In other words,the sellers or suppliers in the market are extremely price sensitive and will not accept any price change which will lead to an absolute cessation of market supply.In this case,understandably,any increase in demand will not have any effect on the equilibrium price in the market due to perfectly price elasticity of supply.However,an increase in demand will impel the sellers or suppliers to increase the market supply to compensate or fulfill the extra market demand at the same equilibrium price leading to an increase in equilibrium quantity.Hence,in this case,the equilibrium price will remain constant but equilibrium quantity will increase in the market.