Question

Draw and explain the following degree of elasticity of supply.

E_p = ∞

Answer 1

The supply of a commodity is said to be perfectly elastic when suppliers are prepared to supply an infinite (unlimited) quantity for a specified price, but if the price reduces even slightly, the quantity supplied declines to zero. This shows a situation in which supply is infinitely responsive to even the smallest price change. In the real world, this is a wholly theoretical situation known as Perfect Competition.