A horizontal demand curve implies that the elasticity of demand is :

Question

Accepted Answer

A horizontal demand curve implies that the elasticity of demand is infinite. This is because a horizontal demand curve represents a situation where consumers are perfectly responsive to price changes. In other words, even the slightest increase in price would cause the quantity demanded to drop to zero, while any decrease in price would not change the quantity demanded, as it is already at its maximum. This scenario is characteristic of perfectly elastic demand, where the elasticity of demand is infinite.

1. **Explanation for Option 4 (Correct Answer: Infinite):**
   - A horizontal demand curve indicates that consumers are willing to purchase any quantity of a good at a specific price, but none at a higher price. This reflects a situation of perfect elasticity, where the price elasticity of demand is infinite. In economic terms, this means that the percentage change in quantity demanded is infinitely large in response to any percentage change in price. Therefore, Option 4 is correct because it accurately describes the nature of a horizontal demand curve.

2. **Explanation for why other options are incorrect:**
   - **Option 1 (Equal to one):** A demand curve with elasticity equal to one is known as unitary elastic demand. This means that the percentage change in quantity demanded is exactly equal to the percentage change in price. A horizontal demand curve does not exhibit this characteristic, as it represents perfect elasticity, not unitary elasticity.
   
   - **Option 2 (Less than one):** When the elasticity of demand is less than one, the demand is considered inelastic. This means that the percentage change in quantity demanded is less than the percentage change in price. A horizontal demand curve does not fit this description, as it shows that consumers are extremely sensitive to price changes, which is the opposite of inelastic demand.
   
   - **Option 3 (Zero):** A zero elasticity of demand implies perfectly inelastic demand, where quantity demanded does not change regardless of price changes. This is represented by a vertical demand curve, not a horizontal one. Therefore, a horizontal demand curve cannot have zero elasticity.

In conclusion, the correct interpretation of a horizontal demand curve is that it represents infinite elasticity, making Option 4 the correct answer.