Which of the following statements is an example of perfectly elastic demand? A. A 10 percent rise in Rita's income decreases supply of canned fish by 5 percent. B. The price elasticity of demand for bottled water in Ohio is 1.5 while in Illinois it is 096. 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. D. A high incidence of diabetes has resulted in a large increase in demand for insulin

Question

Which of the following statements is an example of perfectly elastic demand? A. A 10 percent rise in Rita's income decreases supply of canned fish by 5 percent. B. The price elasticity of demand for bottled water in Ohio is 1.5 while in Illinois it is 096. 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. D. A high incidence of diabetes has resulted in a large increase in demand for insulin

Answer 1

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.This statement is an example of perfectly elastic demand. In this case, a small change in price leads to an infinite change in quantity demanded. This means that buyers are extremely sensitive to price changes and will only purchase at a specific price. If Sherry lowers her price by just a penny, she sees a significant increase in demand, indicating that the demand for her peaches is perfectly elastic.

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