Perfectly elastic demand refers to a situation where the quantity demanded of a good or service changes infinitely with any change in price. In this scenario, consumers are highly sensitive to price changes, and even the slightest increase in price leads to a complete drop in demand, while a decrease in price can lead to an infinite increase in quantity demanded. This concept is important because it helps to understand consumer behavior in markets where substitutes are readily available and consumers are willing to switch based on price fluctuations.
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