Question
The price elasticity of demand for a vertical demand curve is: a. perfectly elastic. b. unitary elastic. c. perfectly inelastic. d. elastic.
Ask by Ortega Davies. in the United States
Jan 24,2025
Real Tutor Solution
Tutor-Verified Answer
Answer
The price elasticity of demand for a vertical demand curve is **perfectly inelastic**.
Solution
A **vertical demand curve** represents a situation where the quantity demanded remains unchanged regardless of any change in price. This implies that consumers are **completely unresponsive** to price changes.
**Price Elasticity of Demand (PED)** measures how much the quantity demanded of a good responds to a change in its price. The PED is calculated as:
\[
\text{PED} = \frac{\% \text{ Change in Quantity Demanded}}{\% \text{ Change in Price}}
\]
For a vertical demand curve:
- **Quantity demanded does not change** when the price changes.
- Therefore, the **percentage change in quantity demanded is 0**.
- This results in a PED of **0**, indicating **perfectly inelastic** demand.
**Summary of Options:**
- **a. Perfectly elastic**: PED is infinite (horizontal demand curve).
- **b. Unitary elastic**: PED is exactly 1.
- **c. Perfectly inelastic**: PED is 0 (vertical demand curve).
- **d. Elastic**: PED is greater than 1.
**Correct Answer:**
c. perfectly inelastic.
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Simplify this solution Bonus Knowledge
In the world of economics, a vertical demand curve represents perfectly inelastic demand. This means that consumers will buy the same quantity regardless of price changes. Think of life-saving medications; no matter how much they cost, people will still need them! In practice, industries or products with vertical demand often include essentials like medicine and basic food supplies. Businesses in such areas know that their sales won't fluctuate much with price changes, making it crucial to strategize around other factors, like quality and accessibility, rather than just price competition.
