ECONOMICS
ELASTICITY OF DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
TRUE
|
|
|
FALSE
|
|
|
Either A or B
|
|
|
None of the above
|
Detailed explanation-1: -Perfectly elastic demand is when the demand for the product is entirely dependent on the price of the product. This means that if any producer increases his price by even a minimal amount, his demand will disappear. Customers will then switch to a different producer or supplier.
Detailed explanation-2: -Producer Impact of a Subsidy Therefore, producers are made better off by the subsidy. In general, consumers and producers share the benefits of a subsidy regardless of whether a subsidy is directly given to producers or consumers.
Detailed explanation-3: -Perfectly elastic demand means when the percentage of change in quantity demanded is infinite even if the percentage of change in price is zero, the demand is said to be perfectly elastic.