What is the PED value for perfectly elastic demand?

What is the PED value for perfectly elastic demand?

• A. 0
• B. ∞
• C. 1
• D. -1

Answer: (B)

When we think about price elasticity of demand, we’re looking at how much quantity demanded changes in response to a price change. For perfectly elastic demand, consumers are infinitely responsive: even the tiniest fall in price would cause the quantity demanded to explode, while even a tiny rise would push demand to zero. Mathematically, PED is the percentage change in quantity demanded divided by the percentage change in price. If price changes are very small, the quantity response becomes extremely large, so the ratio grows without bound. In theory, that means PED is infinite. This corresponds to a horizontal demand curve at that price. Other values describe less extreme responses: zero means no response to price (perfectly inelastic), one means a proportional response (unit elastic), and a finite negative value (often discussed as -1 in sign conventions) indicates unitary elastic in magnitude, not perfectly elastic. But for perfect elasticity, the ratio is infinite.

When we think about price elasticity of demand, we’re looking at how much quantity demanded changes in response to a price change. For perfectly elastic demand, consumers are infinitely responsive: even the tiniest fall in price would cause the quantity demanded to explode, while even a tiny rise would push demand to zero. Mathematically, PED is the percentage change in quantity demanded divided by the percentage change in price. If price changes are very small, the quantity response becomes extremely large, so the ratio grows without bound. In theory, that means PED is infinite. This corresponds to a horizontal demand curve at that price. Other values describe less extreme responses: zero means no response to price (perfectly inelastic), one means a proportional response (unit elastic), and a finite negative value (often discussed as -1 in sign conventions) indicates unitary elastic in magnitude, not perfectly elastic. But for perfect elasticity, the ratio is infinite.