Question

If MR curve is parallel to X-axis, what does it indicate about the price elasticity of demand for the commodity?

Answer 1

• If the Marginal Revenue (MR) curve is parallel to the X-axis, it means that MR is constant for all levels of output. This situation typically occurs under perfect competition, where a firm is a price taker and can sell any quantity of the product at the prevailing market price.
• It implies that the price elasticity of demand is infinite (i.e., perfectly elastic).
• In other words, even a small increase in price will reduce the quantity demanded to zero, and any decrease in price is unnecessary, as the firm can sell any quantity at the market price.
• When the MR curve is parallel to the X-axis, the price elasticity of demand is perfectly elastic (∞).