Class 11 Micro Economics Notes · CBSE
Special Cases of Demand and Supply
Special Cases of Demand and Supply — understanding equilibrium changes under perfectly elastic and perfectly inelastic curves. CBSE Class 11 Microeconomics notes with graphs.
Last updated: 16 Sep 2026
Notes
The Four Anchoring Rules
When supply is perfectly elastic, change in demand does not affect the equilibrium price — it only changes the equilibrium quantity.
When demand is perfectly elastic, change in supply does not affect the equilibrium price — it only changes the equilibrium quantity.
When supply is perfectly inelastic, change in demand does not affect the equilibrium quantity — it only changes the equilibrium price.
When demand is perfectly inelastic, change in supply does not affect the equilibrium quantity — it only changes the equilibrium price.
Special Case Lab — The Eight Scenarios
Increase in Demand ()
When demand increases, the demand curve shifts to the right from DD to D₁D₁. Supply curve SS is a horizontal straight line parallel to the X-axis. Due to the increase in demand for the product, the new equilibrium is established at E₁.
Equilibrium quantity rises from OQ to OQ₁ but equilibrium price remains same at OP as supply is perfectly elastic.
Decrease in Demand ()
When demand decreases, the demand curve shifts to the left from DD to D₂D₂. Supply curve SS is a horizontal straight line parallel to the X-axis. Due to the decrease in demand, the new equilibrium is established at E₂.
Equilibrium quantity falls from OQ to OQ₂ but equilibrium price remains the same at OP as supply is perfectly elastic.
Increase in Supply ()
When supply increases, the supply curve shifts to the right from SS to S₁S₁. Demand curve DD is a horizontal straight line parallel to the X-axis. Due to the increase in supply for the product, the new equilibrium is established at E₁.
Equilibrium quantity rises from OQ to OQ₁ but equilibrium price remains the same at OP as demand is perfectly elastic.
Decrease in Supply ()
When supply decreases, the supply curve shifts to the left from SS to S₂S₂. Demand curve DD is a horizontal straight line parallel to the X-axis. Due to the decrease in supply, the new equilibrium is established at E₂.
Equilibrium quantity falls from OQ to OQ₂ but equilibrium price remains same at OP due to perfectly elastic demand.
Increase in Demand ()
When demand increases, the demand curve shifts to the right from DD to D₁D₁. Supply curve SS is a vertical straight line parallel to the Y-axis. Due to the increase in demand for the product, the new equilibrium is established at E₁.
Equilibrium price rises from OP to OP₁ but equilibrium quantity remains the same at OQ as supply is perfectly inelastic.
Decrease in Demand ()
When demand decreases, the demand curve shifts to the left from DD to D₂D₂. Supply curve SS is a vertical straight line parallel to the Y-axis. Due to the decrease in demand, the new equilibrium is established at E₂.
Equilibrium price falls from OP to OP₂ but equilibrium quantity remains the same at OQ as the supply is perfectly inelastic.
Increase in Supply ()
When supply increases, the supply curve shifts to the right from SS to S₁S₁. Demand curve DD is a vertical straight line parallel to the Y-axis. Due to the increase in supply for the product, the new equilibrium is established at point E₁.
Equilibrium price falls from OP to OP₁ but equilibrium quantity remains the same at OQ as demand is perfectly inelastic.
Decrease in Supply ()
When supply decreases, the supply curve shifts to the left from SS to S₂S₂. Demand curve DD is a vertical straight line parallel to the Y-axis. Due to the decrease in supply, the new equilibrium is established at point E₂.
Equilibrium price rises from OP to OP₂ but equilibrium quantity remains the same at OQ as demand is perfectly inelastic.
The Eight-Case Summary Table
| Case | Scenario | Equilibrium Price | Equilibrium Quantity |
|---|---|---|---|
| I. Supply perfectly elastic | (a) Increase in demand | Unchanged | Rises |
| I. Supply perfectly elastic | (b) Decrease in demand | Unchanged | Falls |
| II. Demand perfectly elastic | (a) Increase in supply | Unchanged | Rises |
| II. Demand perfectly elastic | (b) Decrease in supply | Unchanged | Falls |
| III. Supply perfectly inelastic | (a) Increase in demand | Rises | Unchanged |
| III. Supply perfectly inelastic | (b) Decrease in demand | Falls | Unchanged |
| IV. Demand perfectly inelastic | (a) Increase in supply | Falls | Unchanged |
| IV. Demand perfectly inelastic | (b) Decrease in supply | Rises | Unchanged |
Key Takeaways
Key Takeaways
- The anchoring curve decides what cannot change: a perfectly elastic curve (horizontal) locks the price; a perfectly inelastic curve (vertical) locks the quantity. ⭐
- Supply perfectly elastic: demand changes move only the quantity — price stays at OP. ⭐
- Demand perfectly elastic: supply changes move only the quantity — price stays at OP. ⭐
- Supply perfectly inelastic: demand changes move only the price — quantity stays at OQ. ⭐
- Demand perfectly inelastic: supply changes move only the price — quantity stays at OQ. ⭐
- Perfectly elastic and perfectly inelastic curves are imaginary situations — they are analytical tools, not observed markets.