Question

Statement (1): When supply curve is vertical, price elasticity is infinity.

Statement (2): When supply curve is horizontal, price elasticity of supply will be zero.

Options

• Both the statements are true.

• Both the statements are false.

• Statement 1 is true and Statement 2 is false.

• Statement 2 is true and Statement 1 is false.

Answer 1

Both the statements are false.

Explanation:

• Statement (1): A vertical supply curve parallel to the Y-axis indicates perfectly inelastic supply, which has a price elasticity of zero (E_s = 0). This means that despite price changes, the quantity supplied remains constant.
• Statement (2): A horizontal supply curve parallel to the X-axis depicts totally elastic supply, with price elasticity of supply equal to infinity (E_s = ∞). This means that producers are willing to supply an endless quantity at a fixed price, but supply will decrease to zero if the price falls even slightly.