2024 · Q63
Under normal downward sloping demand curve and fully elastic supply curve of a commodity, an exogenous decrease in demand would lead to
General KnowledgeIndian Economy
- Aincrease in equilibrium price and quantity
- Bdecrease in equilibrium price and quantity
- Cdecrease in equilibrium quantity and no change in price
- Dincrease in equilibrium price and no change in quantity
Explanation
With a fully (perfectly) elastic supply curve, the supply curve is horizontal at the given price. An exogenous decrease in demand shifts the demand curve leftward along this horizontal supply curve, so the equilibrium price does not change while the equilibrium quantity decreases. The answer is (C).