Question

If the demand curve is vertical, what happens to the equilibrium price with a reduction in supply?

a) Rise, and equilibrium quantity stays the same.
b) Stay the same, and equilibrium quantity falls.
c) Rise, and equilibrium quantity falls.
d) Rise, and equilibrium quantity rises.

Answer 1

If the demand curve is vertical, a reduction in supply will cause the equilibrium price to rise and the equilibrium quantity to fall. The correct option is: c).

Step-by-step explanation:

When the demand curve is vertical, it means that the quantity demanded remains the same regardless of the price. If there is a reduction in supply, it will lead to a shortage in the market. As a result, the equilibrium price will rise, and the equilibrium quantity will fall.