Perfectly Elastic Demand – Explanation with Examples

by Rusith

Perfectly elastic demand (also known as infinite elasticity) is where even a little change in the price results in an infinite change in the quantity demanded.

Definition of Perfectly Elastic Demand

Perfectly elastic demand is where the demand is infinite only at a specific price. Even a slight change in the price will eliminate the entire demand for the product, resulting in zero demand.

Perfectly elastic demand happens in a market where the customers are extremely sensitive to the changes in price.

Examples of Perfectly Elastic Demand

An infinite number of quantities demanded is available with the given level of price in perfectly elastic demand market. Even a slight increase or decrease in the price result zero level of demand.

Perfectly elastic demand is an extreme case where practically it is rare to see. The following example will help you to understand the behavior of perfectly elastic demand.

Example: A company in the Washington, United States sells apples for $2 per pound. If the company increases their prices then the below will be the result.

There are many companies in Washington, United States which sell apples. The competition of the price is extremely high. The prices of all companies are at the same level due to this factor with a very low-profit margin.

On other hand, customers can easily purchase many substitute products (ex: oranges, grapes) to fulfill their needs and easily switch over with suppliers as well as the product.

Hence any company which sells apples can not increase the price which results in zero level of demand.