Suppose that the demand curve for wheat in each country is inelastic up to some "choke" price $p^{*}-\mathrm{a}$ price so high that nothing is bought-so that the demand curve is vertical at $Q^{*}$ at prices below $p^{*}$ and horizontal at $p^{*} .$ If $p^{*}$ and $Q^{*}$ vary across countries, what does the world's demand curve look like? Discuss how the elasticity of demand varies with price along the world's demand curve.
Added by Janet P.
Step 1
In this hypothetical case with 2 countries, the demand curve is vertical at $Q^{*}$ at prices below $p^{*}$ and horizontal at $p^{*}$. Therefore, the world's demand curve is a downward sloping step function. Show more…
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