Supply being perfectly inelastic what will be the effect of increase or decrease in demand on price ...........

Supply being perfectly inelastic, what will be the effect of increase or decrease in demand on price and equilibrium quantity?

Price increases or decreases respectively

No effect on equilibrium quantity

Both (a) and (b)

None of these

- Supply being perfectly inelastic means that the quantity supplied does not change regardless of price.

- Option 1: Price increases or decreases respectively

- When demand increases, price increases because supply can't adjust.

- When demand decreases, price falls because supply remains unchanged.

- Option 2: No effect on equilibrium quantity

- The equilibrium quantity stays the same due to inelastic supply, even as demand shifts.

- Option 3: Both (a) and (b)

- Includes both correct effects: price change and constant quantity.

- Option 4: None of these

- Incorrect, as market dynamics do affect price, maintaining constant quantity.

The correct option is: Option 3 - Both (a) and (b)

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