Question

Explain briefly the perfectly elastic demand and perfectly inelastic demand.

Hint:

Perfectly elastic demand is rarely observed in the real world, while perfectly inelastic demand may apply to essential goods like life-saving medicines.

Answer 1

Step 1: Understanding perfectly elastic demand.
Perfectly elastic demand refers to a situation where the quantity demanded of a good or service changes infinitely in response to even the slightest change in price. The demand curve is horizontal, indicating that any increase in price will lead to zero quantity demanded.

Step 2: Understanding perfectly inelastic demand.
Perfectly inelastic demand refers to a situation where the quantity demanded does not change at all regardless of changes in price. The demand curve is vertical, meaning that consumers will buy the same quantity regardless of price changes.

Step 3: Conclusion.
Thus, perfectly elastic demand shows infinite sensitivity to price, while perfectly inelastic demand is completely insensitive to price.