Home › CA Foundation › Business Economics › Law of Demand and Elasticity of Demand › The horizontal demand curve associated with perf…
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_
Related questions
If two goods are perfect substitutes for each other, the cross-price elasticity of demand A positive cross-price elasticity of demand between two goods indicates that the goods areSugar is priced at Rs 50 with 10 kg demanded. When the price of tea falls from Rs 30 to RsTea is priced at Rs 30 with 5 kg demanded. When the price of coffee rises from Rs 25 to RsThe cross-price elasticity between goods X and Y is -0.8. If the price of Y rises by 20%, When the price of brand Imperial rises by 10%, the demand for brand Royal rises by 15%. ThIf the proportion of a consumer's income spent on a good increases as income increases, thReal incomes of customers rose by 10%. A dealer's used-car sales fell from 4,000 to 3,850