When will increase in supply bring down the price, leaving the quantity demanded unchanged?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → When demand for the commodity is perfectly inelastic.
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Perfectly inelastic demand means that the quantity demanded remains constant regardless of any change in price. The demand curve is vertical.
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When supply increases, it leads to a fall in price due to excess supply.
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However, if demand is perfectly inelastic, consumers will continue to buy the same quantity even at the lower price.
Example: Life-saving medicines like insulin
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Suppose a diabetic patient must take 1 vial of insulin per week, regardless of its price.
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If the price is ₹500 per vial, the patient buys 1 vial per week.
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If the price falls to ₹300 due to an increase in supply, the patient still buys only 1 vial per week, because they need only one and cannot use more, even if it’s cheaper.