Answer
C) Tom, Harry, and Mary
Work Step by Step
Tom: Demand increased, but supply was perfectly inelastic.
With an inelastic supply curve, an increase in demand would shift price higher and not affect quantity.
Dick: Demand increased, but it was perfectly inelastic.
If demand increased (and remained perfectly inelastic), the price and quantity would both increase. (We are told quantity stayed constant.)
Harry: Demand increased, but supply decreased at the same time.
When demand increased, the price and quantity both increased. However, since supply increased as well, price increased again, but quantity returned to the original equilibrium.
Larry: Supply decreased, but demand was unit elastic.
With a decrease in supply, the quantity decreases, and the price increases.
Mary: Supply decreased, but demand was perfectly inelastic.
For an inelastic item, the price increases, and the quantity stays the same.
Of the five people, Tom, Harry, and Mary had possible explanations.
