Which of the following statement/statements are true?
Statement 1: Perfectly elastic supply curve is a vertical line parallel to y axis.
Statement 2: Perfectly elastic supply implies perfectly elastic demand as well.
Answer & explanation
Correct answer: option 2
The correct answer is Option 2: Both the statements are false.
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Statement 1: "Perfectly elastic supply curve is a vertical line parallel to y-axis." This is false. A perfectly inelastic supply curve is a vertical line, meaning that quantity supplied remains fixed regardless of price changes. A perfectly elastic supply curve is a horizontal line, meaning suppliers are willing to supply any quantity at a fixed price.
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Statement 2: "Perfectly elastic supply implies perfectly elastic demand as well." This is false. The elasticity of supply and demand are independent concepts. A market may have perfectly elastic supply while demand remains elastic, inelastic, or even perfectly inelastic. There is no direct relationship requiring both to be perfectly elastic.