Question

Describe the general appearance of a demand or a supply curve with infinite elasticity.

Short answer

A demand or supply curve with infinite elasticity appears as a horizontal line. This indicates that consumers (demand curve) or suppliers (supply curve) are infinitely responsive to any change in price, even a very small one. In both cases, a tiny increase in price would result in the quantity demanded or supplied instantly dropping to zero, while a tiny decrease in price would make the quantity demanded or supplied become infinite. This extreme sensitivity to price changes is the reason for the horizontal appearance of these curves.

Step-by-step solution

Define Elasticity

Elasticity is a measure of responsiveness or sensitivity of a variable to changes in another variable. In the context of demand and supply, elasticity is used to describe how the quantity demanded or supplied responds to a change in price.

Infinite Elasticity

Infinite elasticity means that the quantity demanded or supplied changes by an infinite amount in response to any change in price. In other words, even a very small change in price leads to an infinitely large change in quantity.

Demand Curve with Infinite Elasticity

A demand curve with infinite elasticity is a horizontal line. This means that at a specific price, consumers are willing to buy any quantity of the good, and if the price were to increase by even a tiny amount, the quantity demanded would instantly drop to zero. Conversely, if the price were to decrease by even a tiny amount, the quantity demanded would instantly become infinite.

Supply Curve with Infinite Elasticity

A supply curve with infinite elasticity is also a horizontal line. This means that suppliers are willing to produce any quantity of the good at a specific price, and if the price were to decrease by even a tiny amount, the quantity supplied would instantly drop to zero. Conversely, if the price were to increase by even a tiny amount, the quantity supplied would instantly become infinite.

Reason for Horizontal Curves

The reason these curves are horizontal is that, with infinite elasticity, the relationship between price and quantity demanded or supplied is such that any change in price results in an extremely responsive change in quantity. These horizontal demand and supply curves represent situations where there is extreme sensitivity to price changes, and even the slightest change in price completely alters the market dynamics.