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If the demand curve for a life-saving medicine is perfectly inelastic, then a reduction in supply will cause the equilibrium price to:

A.
rise and the equilibrium quantity to fall.

B.
rise and the equilibrium quantity to rise.

C.
rise and the equilibrium quantity to fall.

D.
stay the same and the equilibrium quantity to fall.

User Cleverpaul
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1 Answer

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Step-by-step explanation:

If the demand curve for a life-saving medicine is perfectly inelastic, it means that the quantity demanded does not change regardless of the price of the medicine. In this case, a reduction in supply will cause the equilibrium price to rise, because the reduced supply will lead to an increase in the price that sellers are able to charge.

However, the equilibrium quantity will fall, because the reduced supply will lead to a decrease in the total quantity of medicine that is available for purchase.

Therefore, the correct answer is A: a reduction in supply will cause the equilibrium price to rise and the equilibrium quantity to fall.

User Hce
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