A perfectly elastic demand curve implies that, ceteris paribus,
A) a firm can sell more by lowering its price.
B) if a firm raises its price above the market price, quantity demanded will equal zero.
C) the price a firm charges is irrelevant, as it will sell the same amount regardless of the price charged.
D) a firm can raise its price and not lose all its customers.

Question

Quizplus · Accepted Answer

A perfectly elastic demand curve means that consumers are perfectly price sensitive and will only purchase the product at one price. If the price increases even slightly above the market price, consumers will stop buying the product altogether, making the quantity demanded drop to zero.

A Perfectly Elastic Demand Curve Implies That, Ceteris Paribus