ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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demand is perfectly inelastic and labour costs rise
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demand is perfectly elastic and labour costs rise
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supply is perfectly elastic an the price of a substitute good falls
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demand is perfectly inelastic and labour costs fall
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Detailed explanation-1: -An increase in demand, all other things unchanged, will cause the equilibrium price to rise; quantity supplied will increase. A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease.
Detailed explanation-2: -In case of perfectly inelastic demand the change in price will have no effect on the quantity demanded. The consumers do not change their demand due to the change in price. This usually is seen in case of necessities. Hence, the equilibrium quantity will be same the price might increase or decrease.
Detailed explanation-3: -a) If demand is price inelastic, then increasing price will decrease revenue.
Detailed explanation-4: -What Does Perfectly Inelastic Mean? When a good has an elasticity of zero it is called “perfectly” inelastic. This means that the supply and/or demand of the product will not change at all even as its price changes.