Question

If demand is perfectly inelastic, then:

Select one:
a. the own price elasticity of demand is infinite in absolute value.
b. a small increase in price will lead to a situation where none of the good is purchased.
c. the demand curve is vertical.
d. None of the statements is correct.

Answer 1

If demand is perfectly inelastic, the correct answer is c. the demand curve is vertical, indicating that quantity demanded remains constant regardless of price changes.

Step-by-step explanation:

Perfectly inelastic demand is an economic condition in which a change in the price of a product or a service has no impact on the quantity demanded or supplied because the elasticity of demand or supply is equal to zero. Perfectly inelastic demand occurs rarely in the real world. Close examples might include rare medicines, or fresh water in a time of drought: regardless of any price changes, these products will remain in demand.

If demand is perfectly inelastic, then the correct answer is c. the demand curve is vertical. This is because perfectly inelastic demand means that the quantity demanded does not change regardless of the price level. A perfectly inelastic demand curve is represented graphically by a vertical line, indicating that there will be zero percentage change in quantity demanded, no matter what the price is. It is the extreme opposite of a perfectly elastic demand curve, which is a horizontal line showing that quantity demanded is extremely responsive to price changes.