Under normal downward sloping demand curve and fully elastic supply curve of a commodity, an exogenous decrease in demand would lead to (a) increase in equilibrium price and quantity (b) decrease in equilibrium price and quantity (c) decrease in equilibrium quantity and no change in price (d) increase in equilibrium price and no change in quantity

In economic theory, a fully elastic supply curve is represented as a horizontal line at a specific price level. This indicates that suppliers are willing to provide any quantity at that price, but nothing below it. A normal downward sloping demand curve intersects this horizontal supply curve to determine the initial equilibrium [2]. An exogenous decrease in demand causes the demand curve to shift to the left. Because the supply curve is perfectly horizontal (infinitely elastic), the shift in demand results in a new intersection point at the same price level but at a lower quantity. Consequently, the equilibrium price remains unchanged while the equilibrium quantity decreases. This occurs because, with free entry and exit or perfectly elastic conditions, the price is fixed by cost or market conditions, and only the volume of trade adjusts to demand shocks.

Sources

1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 5: Market Equilibrium > Simultaneous Shifts of Demand and Supply > p. 80
2. [2] https://www.investopedia.com/terms/d/demand-curve.asp