# A perfectly elastic demand curve is. Microeconomics: Chapter 6 (Test) Flashcards 2022-10-09

A perfectly elastic demand curve is Rating: 4,5/10 1661 reviews

A perfectly elastic demand curve is a theoretical construct in economics that represents a situation in which the quantity of a good or service demanded is infinitely sensitive to changes in price. In other words, if the price of a good or service increases by even the slightest amount, the demand for that good or service will drop to zero. Conversely, if the price of the good or service decreases, the demand for it will increase to infinity.

There are several factors that can contribute to a perfectly elastic demand curve. One is the presence of close substitutes for the good or service in question. If there are many other products or services that can fulfill the same need as the one being considered, then a small change in price can lead to a significant shift in demand as consumers switch to the cheaper alternative.

Another factor that can contribute to a perfectly elastic demand curve is the presence of a large number of buyers. If there are many potential consumers for a particular good or service, then the demand for it will be more sensitive to changes in price. This is because each individual buyer has less market power and is therefore less able to absorb price increases.

A perfectly elastic demand curve is often depicted as a straight, horizontal line on a graph, with the price of the good or service on the y-axis and the quantity demanded on the x-axis. This is in contrast to a perfectly inelastic demand curve, which is depicted as a vertical line, indicating that the quantity demanded is unchanged regardless of changes in price.

In reality, it is rare to see a perfectly elastic demand curve in the market. Most goods and services have at least some degree of price elasticity, meaning that their demand is sensitive to changes in price to some extent. However, the concept of a perfectly elastic demand curve is useful for analyzing market dynamics and for understanding the factors that can affect the demand for a particular good or service.

In summary, a perfectly elastic demand curve is a theoretical construct that represents a situation in which the demand for a good or service is infinitely sensitive to changes in price. This can be caused by the presence of close substitutes or a large number of buyers, and is depicted as a horizontal line on a graph. While it is rare to see a perfectly elastic demand curve in the real world, the concept is useful for analyzing market dynamics and understanding the factors that can affect demand.

## A perfectly elastic demand curve is: a. horizontal. b. curvilinear. c. vertical. d. upward sloping.

An Elastic curve is flatter, like the horizontal lines in the letter E. Holding all other forces constant, when the price of gasoline rises, the number of gallons of gasoline demanded would fall substantially over a ten year period because a. Price elasticity of demand is measured as the absolute value of the ratio of these two changes. A 10 percent increase in the price of soda leads to a 20 percent increase in the quantity of iced tea demanded. . What does an inelastic demand curve look like? Consider the following pairs of items: a. What was the percentage change in price that brought about this change in quantity demanded? The income effect also tells us that demand for inferior goods will decrease as income increases and increases as income decreases.

Next

## Elasticity of Demand: Meaning, Formula & Examples

The Demand Curve and the Price Elasticity of Demand Price elasticity of demand is closely related to the slope of the demand curve. You produce jewelry boxes. Elastic vs Inelastic Demand Demand is elastic or inelastic, but economists further separate elasticity into five zones. At the midpoint of the demand curve, in absolute value, a the price elasticity coefficient is at a maximum. The steeper the demand curve, the more inelastic demand is — meaning a small percentage change in price will not have a very big impact on the quantity demanded. If the demand curve is perfectly elastic, then an increase in supply will: A. Elasticity: In economics, the concept of elasticity is used to measure the sensitivity of one variable such as the demand to the changes in another variable such as price, price of a related good, or income.

Next

## Econ Chapter 5 Flashcards

Alice's demand for banana splits is perfectly inelastic. Price Elasticity of Supply The price elasticity of supply measures the percentage change in quantity supplied of a good relative to a percentage change in its price. Inelastic goods are less sensitive to the changes they are being measured against. If the supply curve for housing is perfectly inelastic, then a reduction in demand will cause the equilibrium price to: A. Foreign Currency is perfectly elastic and any increase in price will cause the quantity demanded to drop to zero. Economists compute the price elasticity of demand as a.

Next

## A perfectly elastic demand curve is: A. a downward

Examples of perfectly elastic products are luxury products such as jewels, gold, and high-end cars. The law of demand explains why demand curves are downward sloping. The slope of the demand curve is approximated by the change in price divided by the change in quantity. The demand for a good is said to be elastic or relatively elastic when its PED is greater than one. A perfectly elastic demand implies that a. Hint: You can use perfectly inelastic and perfectly elastic curves to help you remember what inelastic and elastic curves look like: an Inelastic curve is more vertical, like the letter I. If the price elasticity of demand for a good is 4.

Next

## Which demand curve is perfectly elastic?

Perfect elastic demand means that quantity demanded will increase to infinity when the price decreases, and quantity demanded will decrease to zero when price increases. The zones of elasticity can help you determine whether the two goods being compared are complements or substitutes. This means that demand for a good does not change in response to price. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. Perfect elastic demand is when the demand for the product is entirely dependent on the price of the … How is the price elasticity of a product measured? Price elasticity of demand is related to the steepness of the demand curve.

Next

## Microeconomics: Chapter 6 (Test) Flashcards

Alice's price elasticity of demand for banana splits is 1. Demand can either be elastic or inelastic. Why is the demand curve always perfectly elastic? Products are usually inelastic or elastic: Why is the elasticity of demand for farm products relatively inelastic? None of the above answers are correct. What happens when demand is perfectly elastic? Perfectly Inelastic Demand: When demand is perfectly inelastic, quantity demanded for a good does not change in response to a change in price. Answer and Explanation: 1. XXX b the cross-price elasticity of demand between the firm's good and another is positive.

Next

## Econ MC Questions

The price elasticity of demand measures the: A. Why is the demand curve perfectly elastic? The moment you raise your price even just a little, the quantity demanded will decrease. Using the income effect and the income elasticity of demand, you can determine whether a good is a normal or inferior good. Demand is said to be inelastic a. If the price elasticity of demand is bigger than 1 then the demand for the product will be elastic. The flatter the demand curve is, the more elastic demand is.

Next

## Chapter 4 Flashcards

When measured, the price elasticity of demand will have an elasticity coefficient greater than or equal to 0 and can be divided into five zones depending on the value of the coefficient. When demand is elastic in the current price range, a. Elasticity of demand measures the responsiveness of demand to a change in some other factor in the market. Alice says that she would buy one banana split a day regardless of the price. For supply, you can measure: 4. When demand is perfectly elastic, the demand curve is a horizontal line.

Next

A 10 percent decrease in the price of potato chips leads to a 30 percent increase in the quantity of soda demanded. Using cross-sectional data from the two Housing Assistance Supply Experiment HASE sites--Brown County WI and St. It explains the extent to which demand changes when price increases or price decreases. Is perfectly elastic demand 1? If you expect the economy is going to boom and average income in the economy will rise in the foreseeable future, the type of firm that would be able to increase its sales if your expectations are met is a one that sells an inferior good. The price elasticity of demand form most farm products is relatively price inelastic because consumers are not very responsive to changes in price for farm products. However, the idea is beneficial in economic analysis. Income Elasticity of Demand Income elasticity of demand measures the percentage change in demand for a good relative to a percentage change in consumer incomes.

Next

Joseph County IN -- John Mulford estimates that the long-run "permanent" income elasticity of housing expenditures to be 0. Question 10 options: a a and b only b c and d only c e only d a, b, and c only XXX Which of the following statements about price elasticity of demand is false? Demand is said to be elastic a. If the demand for jewelry boxes is elastic and you want to increase your total revenue, you should a. When demand is perfectly elastic the demand curve is quizlet? Price Elasticity of Demand The measured value of elasticity is sometimes called the elasticity coefficient. Using this information, what is likely to happen to housing expenditures if the government increases income transfers to recipients in HASE sites? Alice's income elasticity of demand for banana splits is negative. Perfectly Elastic Demand Conclusion. The ones you are most likely to encounter in undergraduate microeconomics and macroeconomics courses are: 1.

Next