Elasticity of Substitution between Perfect Substitutes

The elasticity of substitution measures the responsiveness of the ratio of two input factors to the change in the relative price of those factors. When two inputs are perfect substitutes, it means that they can be used interchangeably without any change in the level of output.

Option Analysis

Option A: Zero
If the elasticity of substitution is zero, it means that the two inputs are perfect complements, and a change in the relative price will not result in any substitution between them. This option is incorrect because it assumes that the two inputs are perfect complements, which is not the case in this question.

Option B: Greater than Zero
If the elasticity of substitution is greater than zero, it means that the two inputs are substitutable, but not perfectly so. A change in the relative price will result in some substitution between them, but not to the extent that they are perfect substitutes. This option is also incorrect because the question explicitly states that the two inputs are perfect substitutes.

Option C: Less than Infinity
If the elasticity of substitution is less than infinity, it means that the two inputs are substitutable, but there is a limit to the extent of substitution that can occur. This option is incorrect because perfect substitutes can be used interchangeably without any limit to the extent of substitution.

Option D: Infinite
If the elasticity of substitution is infinite, it means that the two inputs are perfect substitutes, and a change in the relative price will result in complete substitution between them. This option is correct because it accurately describes the relationship between perfect substitutes and the elasticity of substitution.

Conclusion

In conclusion, the elasticity of substitution between two perfect substitutes is infinite because they can be used interchangeably without any limit to the extent of substitution.

Infinite elasticity means demand can change even when the price remains same. When goods are perfect substitutes , one good can be easily used in the place of other.