alleryA horizontal supply curve drawn parallel to the quantity axis indicates that the elasticity of supply is:
Ainfinite (perfectly elastic)
Bzero (perfectly inelastic)
Cequal to one (unit elastic)
Dgreater than zero but less than one
Answer & Solution
Correct answer: A. infinite (perfectly elastic)
1. A horizontal supply curve means producers will supply any quantity at one fixed price.
2. An infinitesimal change in price brings an infinitely large change in quantity.
3. This corresponds to $E_s = \infty$.
4. Infinite elasticity is perfectly elastic supply.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit III "Supply", p.7_
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