Question

Price elasticity of demand for the two goods X and Y are zero and (–) 1 respectively. Which of the two is more elastic and why?

Answer 1

When the price elasticity of demand for Good Y and Good X are zero and −1, respectively, the elasticity of demand is less than unity, i.e. E_d < 1. It is a situation of inelastic demand. Here, the demand of Good Y is perfectly elastic compared to Good X. When the price elasticity of demand for Good Y is zero, it implies that Good Y is perfectly inelastic compared to Good X.