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Chapter 5: Problem 14

Describe the general appearance of a demand or a supply curve with infinite elasticity.

Short Answer

Expert verified
In summary, both the demand and supply curves with infinite elasticity appear as horizontal straight lines. This represents a situation where consumers are willing to purchase an unlimited quantity at a given price (in the case of the demand curve), and where producers are willing to supply an unlimited quantity at a given price (in the case of the supply curve). However, even a slight change in price will cause an infinite change in the quantity demanded or supplied.

Step by step solution

01

Infinite elasticity refers to the extreme sensitivity of demand or supply to a change in price. In the context of a demand or supply curve, it represents a situation where the quantity demanded or supplied is extremely responsive to price changes. In other words, even an infinitesimally small change in price will cause an infinite change in the quantity demanded or supplied. #Step 2: Describe the Demand Curve with Infinite Elasticity#

When demand has infinite elasticity, the demand curve is a horizontal straight line. This is because consumers are willing to purchase an unlimited quantity of the good or service at the given price, but will stop buying entirely if the price increases even slightly. Mathematically, the curve can be represented as: \[Q_d = \infty \text{ if } P = P_0\] \[Q_d = 0 \text{ if } P > P_0\] Where \(Q_d\) is the quantity demanded, \(P\) is the price, and \(P_0\) is the specific price at which consumers are willing to buy an unlimited quantity. #Step 3: Describe the Supply Curve with Infinite Elasticity#
02

When supply has infinite elasticity, the supply curve is a horizontal straight line as well. This is because producers are willing to supply an unlimited quantity of the good or service at the given price, but will stop supplying entirely if the price decreases even slightly. Mathematically, the curve can be represented as: \[Q_s = \infty \text{ if } P = P_0\] \[Q_s = 0 \text{ if } P < P_0\] Where \(Q_s\) is the quantity supplied, \(P\) is the price, and \(P_0\) is the specific price at which producers are willing to supply an unlimited quantity. #Conclusion#

In summary, for both the demand and supply curves with infinite elasticity, the general appearance is a horizontal straight line. The demand curve represents the situation where consumers are willing to purchase an unlimited quantity at the given price, while the supply curve represents the situation where producers are willing to supply an unlimited quantity at the given price. However, a slight change in price, either up or down, will cause an infinite change in the quantity demanded or supplied.

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Most popular questions from this chapter

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?

A city has built a bridge over a river and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion? Explain.

The equation for a demand curve is \(\mathrm{P}=48-3 \mathrm{Q}\) What is the elasticity in moving from a quantity of 5 to a quantity of \(6 ?\)

The average annual income rises from \(\$ 25,000\) to \(\$ 38,000,\) and the quantity of bread consumed in a year by the average person falls from 30 loaves to 22 loaves. What is the income elasticity of bread consumption? Is bread a normal or an inferior good?

What is the formula for calculating elasticity?
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