ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -True. Perfectly elastic AS implies that whenever AD is greater than or less than AS, it is AS that adjusts itself to AD to restore the equilibrium, Adjustment of AS becomes possible because of the existence of excess capacity in the economy.

Detailed explanation-2: -Refers to goods that have a price elasticity of supply value equal to infinity. This essentially means that any amount of a good will be supplied at the prevailing price, but nothing is supplied below this prevailing price.

Detailed explanation-3: -Perfect inelasticity refers to a situation in which the quantity demanded does not change at all, regardless of the price. Perfect elasticity refers to a situation in which the quantity demanded is extremely sensitive to changes in price, with even a small change in price leading to a large change in quantity demanded.

Detailed explanation-4: -An example of an elastic supply is the supply of non-necessity goods such as soft drinks where there are many substitutes and choices. A drastic change in price will not have a toll on the supply since consumers would opt for other brands of soft drinks or prefer close substitutes.

Detailed explanation-5: -In a situation of perfectly elastic supply, price of the commodity tends to remain constant, no matter demand increases or decreases.