00:01
So here we're talking about elasticity, right? and when we talk about elasticity, we mean the change in quantity with respect to the change in price.
00:09
And here we want it to be perfectly elastic.
00:13
What does that mean? well, it means that this goes all the way to infinity, that it's very, very big.
00:20
And what does that look like? well, it means graphically, price and quantity, that it's very, very flat, right? so you get a tiny change in price yields a massive change in quantity, right? technically an infinite change in quantity.
00:38
So that the flatter it is, the more elastic it is.
00:42
So let's go through the options.
00:45
This is the opposite, right? a is the opposite and it's wrong.
00:51
If you're willing to pay any amount for the product, as the price changes on the bottom, quantity doesn't change at all, right? this has an elasticity of zero.
01:00
This is actually perfectly elastic.
01:03
B, marginal revenue is falling.
01:06
This is incorrect.
01:08
Imagine that i draw a supply curve here, right? as supply increases, the price remains the same, right? this is wrong...