explain the perfectly elastic demand with diagram and the numerical example
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A perfectly elastic demand curve will be a straight line (horizontal) on a graph, where the x-axis will be the quantity, and the y-axis will be the price of the product. The market demand for a product is directly tied to the price of the product.
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Answer:
A perfectly elastic demand curve will be a straight line (horizontal) on a graph, where the x-axis will be the quantity, and the y-axis will be the price of the product. The market demand for a product is directly tied to the price of the product.
Perfectly Elastic Demand Conclusion
Illustration of perfectly elastic demand
Perfectly elastic demand is a rare occurrence where the quantity that is demanded change infinitely when there is a little change in the price of the product. It is represented by a horizontal demand curve, as seen above.
Perfect elastic demand is considered a theoretical extreme case and there isn’t really any real-life product that could be considered perfectly elastic. However, the idea is beneficial in economic analysis.
If the price elasticity of demand is bigger than 1 then the demand for the product will be elastic. If the price elasticity of demand is higher than 1, the percentage change in the quantity demanded is greater than the percentage change in price.
If Price elasticity of demand> 1 then,
% change in quantity > % change in price
If you have a price-elastic product, you will not be able to increase your revenue by increasing your price. The moment you raise your price even just a little, the quantity demanded will decrease. Examples of perfectly elastic products are luxury products such as jewels, gold, and high-end cars.