Question : When demand is perfectly elastic, a decrease in price will result in:
Option 1: No change in quantity demanded.
Option 2: A small change in quantity demanded.
Option 3: A large change in quantity demanded.
Option 4: An unpredictable change in quantity demanded.
Correct Answer: A large change in quantity demanded.
Solution : The correct answer is (c) a large change in quantity demanded.
Perfectly elastic demand means that even a slight change in price will result in an infinite change in the quantity demanded. Consumers are extremely sensitive to changes in price, and any decrease in price will lead to a significant increase in the quantity demanded.
In other words, when demand is perfectly elastic, consumers are willing to buy an unlimited quantity of a good at a lower price. This occurs when there are many available substitutes for the good, and consumers can easily switch to alternatives if the price changes.
On a graph, a perfectly elastic demand curve is represented as a horizontal line, indicating that the quantity demanded can change infinitely in response to any price change.
