Question

differentiate between perfectly inelastic demand and perfectly elastic demand

Answer 1

Perfectly inelastic demand - the demand curve is vertical. Regardless of how much the supply curve shifts (and thus the price rises or falls), people will always consume the exact same amount of goods.

Perfectly elastic demand - the demand curve is horizontal. If the price rises above the line, people will not consume any goods whatsoever. If the price falls below the line, the excess near-infinite demand created by this drop will make suppliers raise prices to the original price level, at a higher level of supply.