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What is the position of the demand curve when there is perfect elastic demand?
It is a vertical straight line
It is a horizontal straight line
It is a diagonal line down from left to right
It is a U-shaped curve
The correct answer is: It is a horizontal straight line
When demand is perfectly elastic, it indicates that consumers are willing to purchase any amount of a good at a specific price, but none at any price above that. This creates a scenario where the quantity demanded changes infinitely with any change in price. Therefore, the demand curve takes the shape of a horizontal straight line. This horizontal line reflects that the price remains constant regardless of the quantity demanded. For example, if a product is priced at a certain level, consumers will buy as much as they want at that price, but if the price increases even slightly, the quantity demanded drops to zero. This characteristic is typical of markets where there are many substitutes available, and consumers can easily switch between similar products based on price changes. The other options illustrate different types of demand elasticity: a vertical line signifies perfectly inelastic demand (where quantity demanded does not change regardless of price), a diagonal downward sloping line indicates normal elastic demand (where quantity demanded decreases as price increases), and a U-shaped curve does not represent typical demand scenarios.