Economics – The allocation of resources - Supply | e-Consult

A perfectly elastic individual supply curve means that producers are willing to supply an infinite quantity of the good at a given price, but not at any price lower than that. In terms of the market supply curve, this implies that the market supply curve is a horizontal line. This is because the market price will be at a level where producers are willing to supply any quantity.

Factors that might cause an individual supply curve to be perfectly elastic include:

• Large Number of Suppliers: If there are a very large number of suppliers, each individual producer's contribution to the total market supply is negligible. Therefore, the price elasticity of supply for each individual producer approaches infinity, resulting in a perfectly elastic supply curve.
• No Capacity Constraints: The producer has unlimited capacity and can easily increase production without incurring any additional costs.
• Identical Products: The product supplied by the individual producer is identical to the products supplied by other producers in the market.

Diagram:

The horizontal line represents the perfectly elastic market supply curve. The price is constant, and the quantity supplied is infinite at that price.