Under normal downward sloping demand curve and fully elastic supply curve of a commodity, an exogenous decrease in demand would lead to 

The correct answer is decrease in equilibrium quantity and no change in price.

Key PointsUnderstanding the Impact of an Exogenous Decrease in Demand on Market Equilibrium

• Under a normal downward sloping demand curve, as the price of a commodity decreases, the quantity demanded increases, and vice versa.
• With a fully elastic supply curve, the supply of a commodity can adjust to any demand level at a constant price.
• An exogenous decrease in demand means that something outside the usual price-demand relationship causes demand to fall. This could be due to changes in consumer preferences, income, or the prices of related goods.
• In response to a decrease in demand, under a fully elastic supply curve, suppliers are willing to supply any quantity at the same price, leading to no change in price.
• However, since there's less demand for the commodity, the equilibrium quantity will decrease as suppliers adjust to the new demand level.
• Therefore, the market adjusts through a reduction in quantity sold, while the price remains unchanged due to the fully elastic nature of the supply.

Additional Information

• Elasticity of Supply refers to how much the quantity supplied of a good responds to a change in the price of that good. A fully elastic supply curve is horizontal, indicating that any amount of the good can be supplied at a particular price.
• Market Equilibrium is achieved at the point where the quantity demanded by consumers equals the quantity supplied by producers, determining the market price and quantity of the commodity.
• Exogenous Factors affecting demand or supply can include technological changes, governmental policies, changes in consumer tastes, and external economic factors.
• Understanding the dynamics between demand, supply, and market equilibrium is crucial for analyzing how various factors influence market outcomes, including prices and quantities.
• This concept is fundamental in microeconomics, helping to explain how markets adjust to changes and achieve equilibrium over time.