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JAMB Economics 1983 Question 25

Question 25

Elasticity

In the above diagram, P1S is a supply curve for a manufactured good. It shows that

Diagram for this question
  1. A.when price is OP1, quantity is infinitely elastic
  2. B.the higher the price the greater the quantity supplied
  3. C.the higher the price the lower the quantity supplied
  4. D.when price is zero quantity supplied becomes infinite
  5. E.when price is infinite quantity supplied becomes zero.
Show the answer and explanation

Answer: A (when price is OP1, quantity is infinitely elastic)

Explanation

A horizontal supply curve is perfectly (infinitely) elastic: any quantity is supplied at price OP1, but none below it.