GCE Agricultural Science 1989 Question 57

Question 57

Basic Agricultural Economics

Use the graph to answer this question (DD is the demand of yam, SS is the supply of yam). Which of the following deduction is correct of the graph?

Diagram for this question
  1. A.A change in price has a drastic effect on quantity demanded but does not affect quantity supplied
  2. B.A change in price affects quantity demanded and supplied
  3. C.A change in price does not affect quantity demanded but had drastic effect on supply
  4. D.The quantity demanded or supplied does not change as prices change
  5. E.The quantity demanded or supplied changes as price changes.
Show the answer and explanation

Answer: A (A change in price has a drastic effect on quantity demanded but does not affect quantity supplied)

Explanation

DD is horizontal (perfectly elastic: any price change changes demand drastically) while SS is vertical (supply stays the same whatever the price).