If demand is perfectly inelastic, what is the absolute value of the price elasticity coefficient?
A)Infinity
B)Zero
C)More than one
D)Equal to the absolute value of the slope of the demand curve

Question

Quizplus · Accepted Answer

If demand is perfectly inelastic, then any change in price would not lead to any change in quantity demanded. Therefore, the percentage change in quantity demanded is zero for any change in price. Using the formula for price elasticity of demand, we take the percentage change in quantity demanded and divide it by the percentage change in price. Since the numerator is zero, the whole equation would be undefined, but we can simplify it to say that the price elasticity coefficient is zero.

If Demand Is Perfectly Inelastic, What Is the Absolute Value