Read the two statements and choose the correct option.
I. If supply is perfectly inelastic, an increase in demand raises only the price.
II. If supply is perfectly elastic, an increase in demand raises only the quantity.

Only ICorrect answerYour answerOnly IICorrect answerYour answerBoth I and IICorrect answerYour answerNeither I nor IICorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer C

Correct answer: C

Vertical supply: quantity cannot change, so all the effect is on price. I is true.
Horizontal supply: price cannot change, so all the effect is on quantity. II is true.

Ten questions from Market Equilibrium & Price Controls, at your own pace.

Ten questions from Market Equilibrium & Price Controls, at your own pace.

Read the two statements and choose the correct option.I. If supply is perfectly inelastic, an increase in demand raises only the price.II. If supply is perfectly elastic, an increase in demand raises only the quantity.