Perfectly Elastic Demand

Perfectly elastic demand means when the percentage of change in quantity demanded is infinite even if the percentage of change in price is zero, the demand is said to be perfectly elastic. Increasing of demand at given price. According to law of demand, the demand for goods and services changes when there is change in its price. But the relationship between demand and price may not be the equal and same in all the case, it may vary from product to product or time to time or market to conditions. So as to understand extent of the effect of price on the demand, one should know about the price elasticity of demand concepts.

To make easy to understand the concept of perfectly elastic demand, it is showed in the graphical presentation in the below diagram.

Perfectly Elastic Demand Curve

Here in case of perfectly elastic demand, the demand for the goods and services is at Q1 when the price is at P1. Further the demand for goods and services increased from Q1 to Q2 without change in the price i.e at P1 and the demand curve is extending likewise . In fact the quantity demand should not be changed or increased without change or decrease in price according to the law of demand, but in case of some markets like, Automobiles and other essential services, its demand will be perfectly elastic when price remains unchanged.

As such, this is an extreme case of elasticity which is very rarely to be found in practice but is of great theoretical importance. In terms of our formula, a 5% increase in demand with no fall in price will give us the equation :

EP = 5 / 0 = infinity elasticity of demand

In view of the pandemic and contagion of COVID’19, most of the people opted for personal transportation for safety reasons instead of public transportation to commute. Consequently the demand for the personal transport vehicles like bikes and cars has increased though there was no change in the price of personal transportation vehicles in the market. Subsequently the demand for the Petrol and diesel also increased