Exhibit 5-4 Demand curves for silver

Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5-4, which graph illustrates the shape of the demand curve for silver?

Question

Exhibit 5-4 Demand curves for silver

Assume that a wealthy buyer, Mr. Hunt, declares that he will purchase any amount of silver at a price of $125 an ounce. In Exhibit 5-4, which graph illustrates the shape of the demand curve for silver?

Quizplus · Accepted Answer

Graph A represents a perfectly elastic demand curve, meaning that the quantity demanded is infinitely responsive to changes in price. Therefore, at a price of $125 an ounce, Mr. Hunt would purchase an infinite amount of silver. Graphs B, C, and D all have downward sloping demand curves, indicating that as the price increases, the quantity demanded decreases. At a price of $125 an ounce, Mr. Hunt would only purchase a certain quantity of silver on these graphs, not an unlimited amount.

Exhibit 5-4 Demand Curves for Silver