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In the diagram what is the elasticity of demand for oil?

Optional Answers:

1. -1

2. infinity

3. 1

4. 0

What Price to Set? A firm in a competitive market has no control over its price: The market determines each firms price THE

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Answer #1

Answer : option 2) infinity

for perfecfly Elastic demand curve,

Slope of demand curve, dP/dQ = 0, since it's a horizontal line

so , Elasticity = (P/Q)*(dQ/dP)

= (P/Q)*1/0

= Infinity

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