Podcast
Questions and Answers
What happens to the quantity demanded of a good when its price rises in a perfectly elastic demand?
What happens to the quantity demanded of a good when its price rises in a perfectly elastic demand?
- It decreases gradually
- It falls to zero (correct)
- It increases significantly
- It remains the same
Which of the following markets is a seller likely to operate in if they face a perfectly elastic demand?
Which of the following markets is a seller likely to operate in if they face a perfectly elastic demand?
- Monopsony
- Monopoly
- Oligopoly
- Perfectly competitive (correct)
What is the likely outcome if one fruit seller raises their price from 30c to 35c in a market with 100 fruit sellers?
What is the likely outcome if one fruit seller raises their price from 30c to 35c in a market with 100 fruit sellers?
- They will not sell any bananas (correct)
- They will sell fewer bananas, but still some
- They will sell more bananas
- They will sell the same quantity of bananas
Why does a perfectly elastic demand lead to a drastic change in quantity demanded?
Why does a perfectly elastic demand lead to a drastic change in quantity demanded?
What is the key characteristic of a perfectly elastic demand?
What is the key characteristic of a perfectly elastic demand?
What is the consequence for a seller who raises their price in a perfectly competitive market?
What is the consequence for a seller who raises their price in a perfectly competitive market?
Why do fruit sellers in a market face a perfectly elastic demand?
Why do fruit sellers in a market face a perfectly elastic demand?
What happens to the quantity demanded when there is a price rise in a perfectly elastic demand?
What happens to the quantity demanded when there is a price rise in a perfectly elastic demand?
What type of market does a seller operate in if they face a perfectly elastic demand?
What type of market does a seller operate in if they face a perfectly elastic demand?
What is the assumption behind a perfectly elastic demand?
What is the assumption behind a perfectly elastic demand?
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Study Notes
Perfectly Elastic Demand
- Demand for a good is perfectly elastic when a price rise leads to a quantity demanded of zero.
- This occurs in a perfectly competitive market, where there are many sellers and buyers.
- In a perfectly competitive market, sellers have no control over the market price.
- If one seller raises their price, they will not sell any goods.
Example
- 100 fruit sellers sell bananas in a market for 30c each.
- If one seller raises their price to 35c, they will not sell any bananas, as buyers will opt for the cheaper alternatives.
Perfectly Elastic Demand
- Demand for a good is perfectly elastic when a price rise leads to a quantity demanded of zero.
- This occurs in a perfectly competitive market, where there are many sellers and buyers.
- In a perfectly competitive market, sellers have no control over the market price.
- If one seller raises their price, they will not sell any goods.
Example
- 100 fruit sellers sell bananas in a market for 30c each.
- If one seller raises their price to 35c, they will not sell any bananas, as buyers will opt for the cheaper alternatives.
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