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Homework answers / question archive / When consumer spending increases in the vertical range of SRAS, then the price will A
When consumer spending increases in the vertical range of SRAS, then the price will
A. increase and output will decrease.
B. decrease and output will increase.
C. increase and output will increase.
D. decrease and output will decrease.
E. increase and output will change very little.
The correct option is E. increase and output will change very little.
Explanation:
The vertical supply curve of an item explains the inelastic supply of that item in the economy. It explains that a producer is unable to produce more of that commodity and agree to sell the given output level at any price. Given that, consumer spending increases in the economy and that increased spending will shift the demand curve to the right. With the rigid supply curve, an increase in demand will lead to an increase in the price level as there would be a shortage of output in the economy. A producer cannot change the supply due to a vertical supply curve. As a result, the output level will remain the same.