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Perfectly elastic demand is when the demand for the product is entirely dependent on the price of the product. This means that if any producer increases his price by even a minimal amount, his demand will disappear.
Elasticity of demand is usually just comparing what happens to demand when a goods price is changed. For example, with a can of soda, you can use elasticity to measure what would happen to demand if you raised the price (say you charged $1.25 instead of $1.00 for instance).
Perfectly Elastic Demand: When a small change in price of a product causes a major change in its demand, it is said to be perfectly elastic demand. In perfectly elastic demand, a small rise in price results in fall in demand to zero, while a small fall in price causes increase in demand to infinity.
Explain what it means for demand to be price inelastic, unit price elastic, price elastic, perfectly price inelastic, and perfectly price elastic. Explain how and why the value of the price elasticity of demand changes along a linear demand curve.
If the elasticity of demand for a good is sufficiently negative, firms may actually lose revenues when they raise the price of the good. Why is this?
Explain what it means for demand to be price inelastic, unit price elastic, price elastic, perfectly price inelastic, and perfectly price elastic. Explain how and why the value of the price elasticity of demand changes along a linear demand curve.
Perfectly Inelastic Demand: When demand is perfectly inelastic, quantity demanded for a good does not change in response to a change in price. Finally, demand is said to be perfectly elastic when the PED coefficient is equal to infinity. When demand is perfectly elastic, buyers will only buy at one price and no other.
If demand is perfectly elastic, it means that at a certain price demand is infinite (A good with a very high elasticity of demand). In other words, if a firm increased the price by 1%, it would see all its demand evaporate.
A perfectly elastic demand curve is a horizontal line, indicating that the quantity demanded of a good or service is infinitely responsive to changes in its price. This means that consumers will buy any quantity at the prevailing market price, but will not buy any quantity at a higher price.
Perfectly elastic demand refers to a situation where the quantity demanded of a good or service is infinitely responsive to even the smallest change in price. In this scenario, consumers are willing to buy any quantity at the prevailing market price, but will not buy any quantity if the price changes even slightly.