My question that I have to answer is: Demand is perfectly elastic when the absolute value of the own price elasticity of demand is:
a. zero
b. one
c. infinite
d. unkown
Any help will be greatly appreciated cant find this anywhere in my book so I am guessing d
2006-10-26 12:58:56 · 4 answers · asked by Ski_Bum 3 in Social Science ➔ Economics
In economics, the price elasticity of demand (PED) is an elasticity that measures the nature and degree of the relationship between changes in quantity demanded of a good and changes in its price.
Ed = dP/dQ
dP (average price), dQ (average quantity)
When the price elasticity of demand for a good is elastic (Ed > 1)
When the price elasticity of demand for a good is unit elastic (or unitary elastic) (Ed = 1)
When the price elasticity of demand for a good is inelastic (Ed < 1)
When the price elasticity of demand for a good is perfectly elastic (Ed = ?), any increase in the price, no matter how small, will cause demand for the good to drop to zero
2006-10-26 13:45:54 · answer #1 · answered by Jamil Ahmad G 3 · 0⤊ 0⤋
C. Infinite
Zero elasticity means that demand is totally insensitive/inelastic to price changes & would remain constant regardless of price levels.
Elasticity value of one means that changes in price would be followed by a proportionate change in demand. Eg, a 10% increase in price = 10% decrease in demand.
2006-10-28 13:11:14 · answer #2 · answered by Kevin F 4 · 0⤊ 0⤋
the answer is "c". perfectly elastic means infinitely elastic. the demand curve is flat in this case indicating that demand is overly sensitive to price movements.
2006-10-26 21:24:08 · answer #3 · answered by kruk 1 · 1⤊ 0⤋
it is infinite elasticity.
2006-10-26 20:03:15 · answer #4 · answered by sweetshanz88 3 · 0⤊ 0⤋