Question

Demand is said to be perfectly inelastic when price elasticity of demand is

• A. Infinite
• B. +1
• C. -1
• D. Zero

Hint:

Price Elasticity of Demand ($E_d$) Types:
$E_d = 0$ $\rightarrow$ PERFECTLY INELASTIC (Vertical line).
$E_d = 1$ $\rightarrow$ Unitary Elastic.
$E_d = \infty$ $\rightarrow$ PERFECTLY ELASTIC (Horizontal line).

Answer 1

The Correct Option is D

Step 1: Understanding the Concept:
Microeconomic price elasticity of demand ($E_d$): demand is perfectly inelastic ($E_d = 0$) when quantity demanded remains completely invariant to changes in price, depicted as a vertical demand curve.
Key Formula or Approach:
\[ E_d = \left| \frac{\% \Delta Q}{\% \Delta P} \right| = 0 \quad \implies \quad \text{Vertical Linear Demand Curve} \]

Step 2: Detailed Explanation:
In microeconomic demand theory and agricultural elasticity:
- Price Elasticity of Demand ($E_d$) measures the percentage change in quantity demanded in response to a percentage change in commodity price:
1. Perfect Demand Inelasticity ($E_d = 0$) (D): Quantity demanded is completely unresponsive to price shifts ($\% \Delta Q = 0$). Demand curve is a vertical line. (e.g., life-saving medicines, absolute necessities).
2. Unitary Elastic ($E_d = 1$): Percentage change in demand equals percentage change in price.
3. Perfect Elasticity ($E_d = \infty$): Horizontal demand curve.
4. Inelastic ($0 < E_d < 1$): Most staple agricultural foods/fish.

Step 3: Final Answer:
Hence, demand is perfectly inelastic when price elasticity is Zero, matching option (D).