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Chapter 5: Q. 14 (page 130)

Describe the general appearance of a demand or a supply curve with infinite elasticity.

Short Answer

Expert verified

A straight line parallel to the horizontal axis.

Step by step solution

01

Step 1.  Definition

The extreme situation of infinite elasticity, also known as perfect elasticity, occurs when either the quantity demanded (Qd) or supplied (Qs) varies by an unlimited amount in response to any change in price. The supply and demand curves are horizontal in both circumstances.

02

Step 2. Explanation

In case of a demand with infinite elasticity, the demand curve would be a straight line parallel to the horizontal axis, instead of a downward sloping curve.

Similarly, the supply curve would be a straight line parallel to the horizontal axis instead of being an upward sloping curve.

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Most popular questions from this chapter

What is the formula for the cross-price elasticity of demand?

A city has built a bridge over a river and it decides

to charge a toll to everyone who crosses. For one year,

the city charges a variety of different tolls and records

information on how many drivers cross the bridge. The

city thus gathers information about elasticity of demand.

If the city wishes to raise as much revenue as possible

from the tolls, where will the city decide to charge a toll:

in the inelastic portion of the demand curve, the elastic

portion of the demand curve, or the unit elastic portion?

Explain.

Suppose you could buy shoes one at a time, rather

than in pairs. What do you predict the cross-price

elasticity for left shoes and right shoes would be?

What is the formula for the income elasticity of demand?

If supply is inelastic, will shifts in demand have a larger effect on equilibrium price or on quantity?
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