What defines perfectly elastic demand?

Perfectly elastic demand describes a situation where the quantity demanded is highly responsive to even the smallest changes in price. This means that if the price increases even slightly, the quantity demanded drops to zero, and conversely, if the price decreases, the quantity demanded could increase significantly. The concept illustrates extreme sensitivity to price changes, indicating that consumers will only purchase the good at one specific price point.

The definition fits perfectly with the idea that any price increase will lead to a total drop in quantity demanded. Therefore, this option accurately captures the essence of perfectly elastic demand. Understanding this concept is crucial, as it highlights how consumers react in markets with highly substitutable goods where they can easily shift their consumption based on price changes.

Other potential explanations, such as quantity being unaffected by price or changes corresponding to elasticity values not equal to one, are inconsistent with this definition and help illustrate the nuances of demand elasticity.