Under normal downward sloping demand curve and fully elastic supply curve of a commodity, an exogenous decrease in demand would lead to
- A. increase in equilibrium price and quantity
- B. decrease in equilibrium price and quantity
- C. decrease in equilibrium quantity and no change in price ✓
- D. increase in equilibrium price and no change in quantity
Correct Answer: C. decrease in equilibrium quantity and no change in price
Explanation
A fully elastic supply curve is horizontal. An exogenous decrease in demand shifts the downward-sloping demand curve to the left, which results in a lower equilibrium quantity but leaves the equilibrium price unchanged.
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