If a supplier faces a perfectly horizontal demand curve and sets his price slightly higher than the demand curve itself, he can expect:
A) no change in his total revenues.
B) everyone to begin buying his product.
C) a complete loss of revenues.
D) a new demand curve.

Question

Quizplus · Accepted Answer

A perfectly horizontal demand curve indicates perfect elasticity, meaning consumers are extremely sensitive to price changes. If the supplier raises the price even slightly above the market price, consumers will stop buying the product altogether, leading to a complete loss of revenues.

If a Supplier Faces a Perfectly Horizontal Demand Curve and Sets