Question

If the demand curve is parallel to the x-axis, then elasticity of demand is

• A. infinite
• B. one
• C. less than one
• D. more than one

Hint:

Remember the shapes: A Horizontal demand curve has Infinite elasticity (HI). A Vertical demand curve has Zero elasticity (VZ).

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
A demand curve parallel to the x-axis is a horizontal line. This indicates that consumers are willing to buy an unlimited quantity of a good at a specific price, but if the price increases even slightly, the quantity demanded drops to zero.

Step 2: Detailed Explanation:
This situation represents perfectly elastic demand. The formula for price elasticity of demand (\(E_d\)) is the percentage change in quantity demanded divided by the percentage change in price. For a horizontal demand curve, a tiny (near-zero) percentage change in price leads to an infinitely large percentage change in quantity demanded. Mathematically, any number divided by zero is infinite. Therefore, the elasticity of demand is infinite.

Step 3: Final Answer:
If the demand curve is parallel to the x-axis, the elasticity of demand is infinite. Therefore, option (A) is correct.