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Describe what a perfectly elastic demand curve means. That is, what makes demand perfectly elastic?

Describe what a perfectly elastic demand curve means. That is, what makes demand perfectly elastic?

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Answer #1

Demand curves are price elastic when a percentage change in quantity demanded is greater than the percentage change in price (e>1). This means that for any increase/decrease in price, the quantity demanded decreases/increases much more than the increase/decrease in price.

A perfectly elastic demand curve means that for any change in price, the demand curve is a horizontal straight line parallel to the x-axis. This means that demand is very highly responsive to even smaller changes in price. In this case, e = infinity.

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