The producer in a perfectly competitive market is faced with a demand curve whose elasticity is?
Question 1 Report
The producer in a perfectly competitive market is faced with a demand curve whose elasticity is?
Answer Details
In a perfectly competitive market, the producer faces a perfectly elastic demand curve. This means that the elasticity of the demand curve is infinite. Any increase in the price of the product will cause the quantity demanded to fall to zero, as consumers will switch to the products of other producers who charge lower prices. Similarly, any decrease in the price of the product will result in an increase in the quantity demanded by an infinite amount, as all consumers will purchase the product at the lower price. Therefore, the producer has no control over the price of the product in a perfectly competitive market and must accept the market price as given.
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