11.1 Price Elasticity of Demand

Question 1

If the coefficient of elasticity is zero, then the consumer demand for the product is said to be

A. Perfectly inelastic.
B. Perfectly elastic.
C. Unit inelastic.
D. Unit elastic.

Answer 1

A. Perfectly inelastic.

When the coefficient of elasticity (Percentage change in demand ÷ Change in price) is less than one, demand is inelastic. When the coefficient is zero, the demand is perfectly inelastic.

Question 2

When the demand elasticity coefficient is greater than one, demand is

Answer 2

In a relatively elastic range. A small change in price results in a significant change in quantity demanded.

Question 3

When the demand elasticity coefficient is equal to one, demand has

Answer 3

Unitary elasticity (usually a very limited range). A single-unit change in price brings about a single-unit change in quantity demanded.

Question 4

When the demand elasticity coefficient is less than one, demand is

Answer 4

In a relatively inelastic range. A large change in price results in an insignificant change in quantity demanded.

Question 5

When the demand elasticity coefficient is infinite, demand is

Answer 5

Perfectly elastic (depicted as a horizontal line). In pure competition, the number of firms is so great that one firm cannot influence the market price.

Question 6

When the demand elasticity coefficient is equal to zero, demand is

Answer 6

Perfectly inelastic (depicted as a vertical line). Some consumers’ need for a certain product is so high that they will pay whatever price the market sets. The number of these consumers is limited and the amount they desire is relatively fixed.