Question

When the demand for a product is said to be perfectly inelastic, it implies that:

A. The demand curve for the product is relatively flat.

B. As price increases, the quantity demanded increases.

C. The sales of the product are very sensitive to changes in price.

D. The profit per-unit increases with an increase in price.

E. With a change in price, change in quantity demanded is zero.

Answer 1

When the demand for the product is said to be perfectly inelastic, it implies that :

(E) with the change in price, change in quantity demanded is zero.

Price elasticity of demand is the degree of responsiveness of quantity demanded to the price of the commodity.

Elasticity = percentage change in quantity demanded / percentage change in price.

Elasticity is perfectly inelastic when the quantity demanded do not respond to change in the price of the commodity, that is, a change in price will not effect the quantity demanded. In this case, the elasticity of the product will be 0.