Question : The price elasticity of demand is perfectly elastic when it is:
Option 1: -1
Option 2: 0
Option 3: 1
Option 4: Infinity.
Correct Answer: Infinity.
Solution : The correct answer is (d) Infinity.
The price elasticity of demand is a measure of the responsiveness of quantity demanded to changes in price. When the price elasticity of demand is perfectly elastic, it means that even a slight change in price leads to an infinitely large change in the quantity demanded.
In other words, consumers are extremely sensitive to changes in price, and any increase in price would result in a complete loss of demand, or any decrease in price would result in an infinite increase in demand.
Graphically, a perfectly elastic demand curve is represented as a horizontal line, indicating that consumers are willing to purchase any quantity at a specific price, but no quantity at a slightly higher price.
