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Q4. WHAT HAPPENS TO THE DEMAND CURVE DURING A PERFECTLY "ELASTIC DEMAND" SITUATION? WHAT HAPPENS TO...

Q4. WHAT HAPPENS TO THE DEMAND CURVE DURING A PERFECTLY "ELASTIC DEMAND" SITUATION? WHAT HAPPENS TO THE DEMAND CURVE DURING A PERFECTLY "INELASTIC DEMAND" SITUATION? ANSWER BOTH THE QUESTIONS AND GIVE YOUR ANSWER IN 5 BULLET POINTS WITH COMPLETE EXPLANATIONS, DIAGRAMS (IF NECESSARY) AND EXAMPLES | EACH BULLET POINT CARRIES 1 MARK = 5 MARKS

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Answer #1

1.

  • Whenwe talk about the perfect elastic demand curve it means the change in price is zero and only quantity demanded varies
  • The shape of perfectly elastic demand curve is horizontal in nature
  • It is shown on a demand and supply curve
  • The value of price elasticity of demand for a perfectly elastic demand curve is is undefined
  • The case can be seen in a perfect competitive market where price is decided only by the market forces that is demand and supply
  • So change of market price in this market is zero

2.

  • Perfectly inelastic demand is that type of demand in which change in quantity demanded is zero
  • It is also shown on a demand and supply curve
  • Its shape is is vertical in nature
  • The value of price elasticity of demand for perfectly inelastic demand curve is zero.

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