What does a perfectly elastic demand curve look like? A perfectly inelastic demand curve? Explain
What will be an ideal response?
A perfectly elastic demand curve is horizontal and a perfectly inelastic demand curve is vertical. If the demand curve is vertical, then quantity demanded does not change when price changes, or the elasticity equals 0. Quantity demanded is completely unresponsive to changes in price. If the demand curve is horizontal, a tiny increase in price causes quantity demanded to go to zero. As the percentage change in price approaches zero, elasticity of demand approaches infinity. Quantity demanded is extremely responsive to even very small changes in price.
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Which of the following statements is TRUE?
A) In the long run, the average cost curve is always downward sloping. B) In the long run, the quantities of all inputs are fixed. C) In the long run, the firms' fixed costs are greater than its variable costs. D) In the long run, all costs are variable costs.
Total welfare gains from trade to the economy can be measured: a. as the sum of consumer and producer surpluses
b. as the difference between producer surplus and consumer surplus. c. as the sum of consumer and producer surpluses minus taxes d. as the net gain in consumer surplus that results from an action that alters a market equilibrium.