Question

Indicate the degree of elasticity of a supply curve parallel to the X-axis.

Answer 1

In the above graph we can understand that the supply is parallel to X-axis.

Degree of elasticity is infinitive in such supply curves.

At P_e the market supply equals the quantity demanded.

A perfectly elastic supply can be best illustrated by a drug company selling a cancer drug that cures cancer. The drug company will sell it at the highest price that the market will bear, but it will supply any amount at that price. Higher prices would make the drug unaffordable.