Question

Draw diagrams to illustrate the price elasticity of supply as equal to infinity.

Answer 1

• The horizontal supply curve S₂ represents perfectly elastic supply.
• At price OP, sellers are willing to supply any quantity (even infinitely large).
• But if the price falls even slightly below OP, the quantity supplied becomes zero.
• This means the price elasticity of supply is infinite because a tiny change in price causes an enormous change in supply.