Question

If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:rise and the equilibrium quantity to fall.rise and the equilibrium quantity to stay the same.rise and the equilibrium quantity to rise.stay the same and the equilibrium quantity to fall.

Answer 1

The correct answer is: rise and the equilibrium quantity to stay the same.

Step-by-step explanation:

The demand curve for life-saving medicine is perfectly inelastic. This means the shape of the demand curve will be a vertical line. So when there is a reduction in supply, the supply curve will shift to the left.

The new supply curve will intersect the demand curve at a higher point. The price will increase but the equilibrium quantity will remain the same.