Perfectly Elastic Demand

Readers Question: What is the elasticity, if demand is perfectly elastic?

Diagram of Elastic Demand

If demand is perfectly elastic, it means that at a certain price demand is infinite (A good with a very high elasticity of demand). In other words if a firm increased price by 1%, it would see all its demand evaporate.

In a perfectly competitive market it is assumed a firm would have a perfectly elastic demand. This is because if they increased the price, the consumers with perfect information would switch to other firms who offer the identical product.

Price elasticity of demand