Question

What would be the shape of a demand curve of a commodity when its price elasticity of demand is infinite? 

Answer 1

When the price elasticity of demand for a commodity is infinite, it indicates that demand is perfectly elastic. This is an extreme instance in which even the smallest rise in price reduces the quantity demanded to zero, whereas a little decrease in price causes an unlimited increase in demand.

Shape of the Demand Curve for Perfectly Elastic Demand: The demand curve in this case is a horizontal straight line that runs parallel to the X-axis.

Characteristics of a Perfectly Elastic Demand Curve:

1. Perfect Substitutes: This often refers to things that have perfect replacements available on the marketplace.
2. Uniform Pricing: Buyers are particularly sensitive to price changes, and the product is often one that allows customers to switch to alternatives if the price rises.
3. Single Price Point: The product can only be sold at a single price because even a small price rise destroys all demand.