Price elasticity of demand for a product is infinite undera)Perfect co...
If quantity demanded is infinite at the prevailing price, but any rise in price will cause quantity demanded to fall to zero, is said to be perfectly elastic demand. Symbolically, In perfect competition, the demand curve for the product by a firm is perfectly elastic at market price.
View all questions of this test
Price elasticity of demand for a product is infinite undera)Perfect co...
Price Elasticity of Demand
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It indicates how sensitive consumers are to changes in price and helps businesses understand how their pricing strategies affect demand for their products.
Infinite Price Elasticity of Demand
When price elasticity of demand is infinite, it means that a small change in price leads to an infinitely large change in quantity demanded. In other words, consumers are extremely sensitive to price changes, and a slight increase in price causes demand to drop to zero.
Perfect Competition
Perfect competition is a market structure where there are many buyers and sellers, and no single seller has control over the market. In a perfectly competitive market, there are no barriers to entry or exit, and all firms sell identical products at the same price. Given these conditions, consumers have many substitutes available, and they can easily switch to alternative products if the price increases even slightly. Therefore, the price elasticity of demand is likely to be infinite under perfect competition.
Monopolistic Competition
Monopolistic competition is a market structure where there are many sellers, but each offers a slightly differentiated product. In this market structure, firms have some control over the price of their product, but they also face competition from similar products. While consumers have some substitutes available, they may not be as readily available as under perfect competition. Therefore, the price elasticity of demand is likely to be high but not necessarily infinite under monopolistic competition.
Monopoly
A monopoly is a market structure where there is a single seller who has complete control over the market. In a monopoly, there are no close substitutes available, and consumers have limited options. As a result, the price elasticity of demand is likely to be low under a monopoly. Consumers may be less responsive to price changes because they have no alternative products to switch to.
Oligopoly
Oligopoly is a market structure where there are only a few dominant firms that control the market. These firms often engage in strategic behavior and may collude to set prices. In an oligopoly, the price elasticity of demand can vary depending on the behavior of the firms. If the firms compete aggressively and offer close substitutes, the price elasticity of demand may be high. However, if the firms collude and act as a single entity, the price elasticity of demand may be low.
Therefore, the correct answer is option 'A' - Perfect competition. In a perfectly competitive market, consumers have many substitutes available and are highly sensitive to price changes, leading to an infinite price elasticity of demand.
Price elasticity of demand for a product is infinite undera)Perfect co...
Because perfect competitive market is price taker price is determined by forces of supply and demand
To make sure you are not studying endlessly, EduRev has designed CA Foundation study material, with Structured Courses, Videos, & Test Series. Plus get personalized analysis, doubt solving and improvement plans to achieve a great score in CA Foundation.