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The horizontal demand curve associated with perfectly elastic demand (Ep = infinity) is characteristically found in which type of market?
AA market for conspicuous goods
BA pure monopoly market
CA market for Giffen goods
DA perfectly competitive market
Answer & Solution
Correct answer: D. A perfectly competitive market
1. A horizontal demand curve means any quantity is demanded at one price, and zero above it.
2. This implies infinite price elasticity of demand.
3. The text states this type is found in a perfectly competitive market.
4. So the answer is a perfectly competitive market.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.23_
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