March 21, 2018 

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PERFECTLY ELASTIC: An elasticity alternative in which infinitesimally small changes in price cause infinitely large changes in quantity. In other words, quantity is hyper, super, infinitely responsive to price. Any change in price, no matter how small triggers an infinite change in quantity. Perfectly elastic should be compared with other elasticity alternatives--perfectly inelastic, relatively elastic, relatively inelastic, and unit elastic.

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Lesson 7: Market | Unit 5: The Method Page: 22 of 22

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  • How efficient use of resources can automatically result from the self-correcting tendency of markets to achieve equilibrium.
  • The demand price on the demand curve as the value of goods produced by society.
  • The supply price on the supply curve as the value of goods not produced by society.
  • How too much or too little production generates inequality between the demand price and the supply price, and prevents efficiency.
  • How market imperfections, including the lack of competition and externalities, prevent efficiency.

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The demand curve for the output produced by a perfectly competitive firm is perfectly elastic at the going market price. The firm can sell all of the output that it wants at this price because it is a relatively small part of the market. As a price taker, the firm has no ability to charge a higher price and no reason to charge a lower one. The market price facing a perfectly competitive firm is also average revenue and, most important, marginal revenue.

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Today, you are likely to spend a great deal of time strolling through a department store seeking to buy either a how-to book on wine tasting or a bookshelf that will fit in your closet. Be on the lookout for bottles of barbeque sauce that act TOO innocent.
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