The correct option is Increase in price only, quantity remains unchanged..
Explanation
Market equilibrium is established at the point where the demand curve intersects the supply curve. The shape of these curves is determined by price elasticity. A vertical supply curve indicates perfectly inelastic supply, implying that the quantity supplied is fixed and does not respond to changes in price.
Analysis
- Nature of Vertical Supply: A vertical supply curve means the quantity supplied is constant (fixed at Q) regardless of the price level. This typically occurs in the short run or for goods with absolute scarcity (e.g., land or rare antiques).
- Effect of Rightward Demand Shift: A rightward shift in the demand curve represents an increase in demand. This means consumers are willing to pay a higher price for the same quantity.
- Interaction at Equilibrium: As the demand curve shifts to the right, the new intersection point with the vertical supply curve moves upward. Because the supply curve does not move horizontally, the equilibrium quantity remains unchanged.
- Conclusion: The excess demand created by the shift drives the price upward until a new equilibrium is reached. Consequently, the price increases, but the quantity remains constant.
Key Takeaway
When supply is perfectly inelastic (vertical curve), any change in demand affects only the equilibrium price; the equilibrium quantity remains unchanged.