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

Question

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

Answer 1

To answer this question, let's analyze the situation step by step:### Key Concepts:1. **Perfectly Inelastic Supply Curve**: A perfectly inelastic supply curve means that the quantity supplied does not change regardless of changes in price. Graphically, this is represented as a vertical line.2. **Reduction in Demand**: A decrease in demand shifts the demand curve to the left. This means that at every price level, consumers are willing to buy less housing than before.3. **Equilibrium Price and Quantity**: The equilibrium price and quantity are determined by the intersection of the supply and demand curves. When demand decreases, the new equilibrium will occur where the new (shifted) demand curve intersects the supply curve.---### Analysis:- Since the supply curve is perfectly inelastic (vertical), the quantity supplied remains constant regardless of changes in demand.- When demand decreases, the demand curve shifts leftward. As a result, the equilibrium price will fall because there is less competition among buyers for the fixed quantity of housing.- However, since the supply is perfectly inelastic, the equilibrium quantity will **stay the same** because the quantity supplied cannot change.---### Correct Answer:**"Fall and the equilibrium quantity to stay the same."**

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