Which of the following statements is an example of perfectly elastic demand? A. A high incidence of diabetes has resulted in a large increase in demand for insulin B. A 10 percent rise in Rita's income decreases supply of canned fish by 5 percent. C. Sherry is overwhelmed with buyers of her peaches when she lowers their price by a penny a pound compared I to other sellers in the farmers' market. D. The price elasticity of demand for bottled water in Ohio is 1.5 while in Illinois it is 096

Question

Which of the following statements is an example of perfectly elastic demand? A. A high incidence of diabetes has resulted in a large increase in demand for insulin B. A 10 percent rise in Rita's income decreases supply of canned fish by 5 percent. C. Sherry is overwhelmed with buyers of her peaches when she lowers their price by a penny a pound compared I to other sellers in the farmers' market. D. The price elasticity of demand for bottled water in Ohio is 1.5 while in Illinois it is 096

Answer 1

The correct answer is C. Sherry is overwhelmed with buyers of her peaches when she lowers their price by a penny a pound compared to other sellers in the farmers' market.Perfectly elastic demand refers to a situation where a small change in price leads to an infinite change in quantity demanded. In this case, Sherry's peaches have perfectly elastic demand because a small decrease in price (a penny) leads to a significant increase in quantity demanded, overwhelming her with buyers. This indicates that consumers are highly responsive to changes in price, and any decrease in price will result in an infinite increase in quantity demanded.

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