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A decrease in demand lowers the price the most:

A. In the immediate run

B. In the short run

C. When the supply is perfectly elastic

D. When producers have sufficient time to fully adjust to the demand change

Correct Answer : A.


Immediate run is a period in which the supply curve is completely inelastic and increase or decrease in supply is impossible in this period. When demand decreases in immediate run then producers due to completely inelastic supply curve cannot decrease the supply so due to decrease in demand while supply is fixed, the supply exceeds the demand and hence in the result price decreases}

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