Which supply curve represents perfectly inelastic supply?
In economics, the concept of perfectly inelastic supply is crucial for understanding how certain goods and services respond to changes in price. This article aims to explore which supply curve represents perfectly inelastic supply and shed light on the characteristics and implications of such a scenario.
Perfectly inelastic supply refers to a situation where the quantity supplied of a good or service remains constant regardless of changes in price. This means that the supply curve for a perfectly inelastic good is a vertical line parallel to the y-axis. In this article, we will delve into the factors that contribute to perfectly inelastic supply and its impact on market equilibrium.
Firstly, it is essential to understand that perfectly inelastic supply is a rare occurrence in the real world. However, it can be observed in certain scenarios, such as when a good or service is a necessity or when there are significant barriers to entry in the market. For instance, essential utilities like electricity or water can be considered perfectly inelastic as consumers are willing to pay any price to obtain them.
The supply curve for a perfectly inelastic good is a vertical line because the quantity supplied does not change with price. This is represented by the equation Qs = Qs0, where Qs is the quantity supplied and Qs0 is the constant quantity supplied. As a result, the slope of the supply curve is zero, indicating that there is no change in quantity supplied as price varies.
The impact of perfectly inelastic supply on market equilibrium is significant. Since the quantity supplied remains constant, any change in demand will lead to a change in price, but not in the quantity supplied. This means that the market equilibrium is determined solely by the intersection of the supply and demand curves, and any shift in the demand curve will result in a change in price while the quantity supplied remains the same.
In conclusion, the supply curve that represents perfectly inelastic supply is a vertical line parallel to the y-axis. This scenario is rare but can be observed in certain essential goods and services. Understanding perfectly inelastic supply is crucial for analyzing market equilibrium and the responsiveness of goods and services to price changes. By recognizing the factors that contribute to perfectly inelastic supply, economists can better predict and analyze market dynamics in various industries.
