If a demand curve is perfectly inelastic, the price elasticity of demand is

If a demand curve is perfectly inelastic, the price elasticity of demand is

• A. 0
• B. Infinity
• C. 1
• D. Negative

Answer: (A)

Perfectly inelastic demand means quantity demanded does not respond to price changes. Elasticity measures how responsive quantity is to price, using the formula E = percent change in quantity divided by percent change in price. If price changes but quantity stays the same, the percent change in quantity is zero, so the elasticity is zero. Therefore the price elasticity of demand is 0. Infinity would describe a perfectly elastic demand (quantity changes infinitely with any price move), unit elasticity means the quantity changes proportionally with price (E = 1), and a negative value would imply a directed, nonzero response in the opposite direction—none of which applies here since there is no response at all.

Perfectly inelastic demand means quantity demanded does not respond to price changes. Elasticity measures how responsive quantity is to price, using the formula E = percent change in quantity divided by percent change in price. If price changes but quantity stays the same, the percent change in quantity is zero, so the elasticity is zero. Therefore the price elasticity of demand is 0.

Infinity would describe a perfectly elastic demand (quantity changes infinitely with any price move), unit elasticity means the quantity changes proportionally with price (E = 1), and a negative value would imply a directed, nonzero response in the opposite direction—none of which applies here since there is no response at all.