The elasticity of demand and the horizontal demand curve

When analyzing the elasticity of demand, it is important to understand the relationship between price and quantity demanded. The demand curve shows this relationship graphically, with price on the vertical axis and quantity on the horizontal axis. The slope of the demand curve represents the price elasticity of demand.

The concept of price elasticity of demand

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price. It indicates how sensitive consumers are to changes in price. The formula for calculating price elasticity of demand is as follows:

Elasticity of demand = Percentage change in quantity demanded / Percentage change in price

The horizontal demand curve

A horizontal demand curve is a straight line parallel to the x-axis, indicating that the quantity demanded remains constant regardless of changes in price. This means that the percentage change in quantity demanded is zero, as there is no change in quantity. According to the formula mentioned earlier, when the percentage change in quantity demanded is zero, the elasticity of demand is infinite.

Explanation of the correct answer

The correct answer to the question is option B, which states that the elasticity of demand is infinite. This is because a horizontal demand curve implies that the quantity demanded remains constant regardless of changes in price. As a result, the percentage change in quantity demanded is zero, leading to an infinite value for elasticity of demand.

Conclusion

Understanding the relationship between the demand curve and the elasticity of demand is crucial in analyzing consumer behavior and market dynamics. A horizontal demand curve, which is parallel to the x-axis, indicates that the elasticity of demand is infinite. This means that the quantity demanded remains constant regardless of changes in price.