ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Under perfect competition, a demand curve of the firm is perfectly elastic because the firm can sell any amount of goods at the prevailing price. So even a small increase in price will lead to zero demand. This indicates that the firm has no control over price.

Detailed explanation-2: -All goods in a perfectly competitive market are considered perfect substitutes, and the demand curve is perfectly elastic for each of the small, individual firms that participate in the market. These firms are price takers–if one firm tries to raise its price, there would be no demand for that firm’s product.

Detailed explanation-3: -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-4: -economic profit: The difference between the total revenue received by the firm from its sales and the total opportunity costs of all the resources used by the firm. Perfectly elastic: Describes a situation when any increase in the price, no matter how small, will cause demand for a good to drop to zero.

Detailed explanation-5: -Perfectly elastic demand curve is horizontal straight line. This is because at the given price the quantity demanded is infinite, even if there is a slight change in the price the demand becomes infinity and hence the curve is flat. Was this answer helpful?