Question

When is demand perfectly elastic? When is demand perfectly inelastic? What are the values of the price elasticity of demand when demand is perfectly elastic or perfectly inelastic? What do perfectly elastic and perfectly inelastic demand curves look like?

Answer 1

Answer

Perfect elastic demand is that demand when a small increase in price resulted in quantity demand to get equal to 0 and we can also say that price is constant for any quantity demand i.e. consumers are willing to pay same price for whatever quantity they demand.

Perfectly inelastic demand is the demand where whatever whatever be the price charged consumers are willing to purchase same amount of quantity and we can also say that quantity demand will remains constant whatever be the Price.

Elasticity of demand = % change in quantity demand/ % change in Price.

When demand is perfectly elastic as discussed above that Price will remains constant implies that % change in Price = 0

=> Elasticity of demand = % change in quantity demand/ % change in Price = - infinity (here there is negative sign because in general elasticity of demand is negative)

When demand is perfectly inelastic as discussed above that quantity will remains constant implies that % change in quantity demand = 0

=> Elasticity of demand = % change in quantity demand/ % change in Price = 0

When demand is perfectly elastic then Price is constant and hence Demand curve will be a horizontal line and When demand is perfectly inelastic then quantity demand is constant and hence Demand curve will be a vertical line.