Home › CA Foundation › Business Economics › Meaning and Types of Markets › According to the distinguishing-features table, …
According to the distinguishing-features table, the price elasticity of demand facing an individual firm under perfect competition is:
AInfinite (perfectly elastic)
BLarge but finite value
CSmall, near-inelastic value
DExactly equal to zero
Answer & Solution
Correct answer: A. Infinite (perfectly elastic)
1. The features table lists firm-level price elasticity of demand as Infinite for perfect competition.
2. It is Large for monopolistic competition and Small for both oligopoly and monopoly.
3. The trap is to confuse the firm's high elasticity (it is a price taker) with a small value, but the table records Infinite.
4. Zero is not listed for any of the four forms, so it is wrong.
5. Hence Infinite is correct.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit I "Meaning and Types of Markets", p.5_
Related questions
When the demand for a commodity is confined within a country's national boundaries, often Across the four market types, the degree of a firm's control over price is described in thA market with a few sellers selling competing products to many buyers, as in the telecom iIndian Railways is cited as a real-world example of which market structure?The single feature that distinguishes monopolistic competition from perfect competition isA market characterised by many sellers offering identical products to many buyers is:A market where commodities are bought and sold in bulk, typically in Business to Business A weekly Haat Bazaar, where there are no statutory stipulations on transactions, is an exa