Draw and briefly explain a perfectly elastic supply curve.

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Solution

As seen in the figure, a perfectly elastic supply curve is the one in which the supply curve is perfectly horizontal. It is a theoretical curve and such a curve does not actually exist in practice. What the curve actually explains is that a supplier can sell at a particular price an infinite quantity of goods and a small decrease in the price of a quantity can reduce the quantity which is supplied by a supplier to zero because it becomes unprofitable for a supplier to sell at a even a slightly reduced price.

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