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Chapter 5: Q.14 (page 130)

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

Short Answer

Expert verified

A demand or supply curve with infinite elasticity is horizontal in shape.

Step by step solution

01

Step 1. Introduction:

Infinite elasticity is an extremely elastic case of demand or supply where quantity varies by an infinite amount due to any variation in price.

02

Step 2. Explanation:

As the quantity demanded or supplied keeps on increasing irrespective of how small the intensity of a price change is, the demand or supply curve with infinite elasticity is horizontal in shape. The demand and supply curves with infinite elasticity are illustrated in the figure below:

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Most popular questions from this chapter

A city has built a bridge over a river and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about the elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion? Explain.

Say that a certain stadium for professional football has 70,000 seats. What is the shape of the supply curve for tickets to football games at that stadium? Explain.

Would you usually expect elasticity of demand or supply to be higher in the short run or in the long run? Why?

Suppose you are in charge of sales at a pharmaceutical company, and your firm has a new drug that causes bald men to grow hair. Assume that the company wants to earn as much revenue as possible from this drug. If the elasticity of demand for your company’s product at the current price is 1.4, would you advise the company to raise the price, lower the price, or to keep the price the same? What if the elasticity were 0.6? What if it were 1? Explain your answer.

From the data in Table 5.5 about demand for smart phones, calculate the price elasticity of demand from: point B to point C, point D to point E, and point G to point H. Classify the elasticity at each point as elastic, inelastic, or unit elastic.

PointsPQ
A603,000
B702,800
C802,600
D902,400
E1002,200
F1102,000
G1201,800
H1301,600
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