Question : A demand curve, which is parallel to the horizontal axis, showing quantity, has a price elasticity equal to
Option 1: zero
Option 2: one
Option 3: less than one
Option 4: infinite
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Correct Answer: infinite
Solution : The correct option is infinite.
When a demand curve is perfectly horizontal, it signifies that the quantity demanded remains unaltered regardless of shifts in price. It indicates an infinite price elasticity of demand. In practical terms, infinite price elasticity of demand suggests that even the slightest change in price will lead to an infinite change in the quantity demanded.
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