Question

When the demand curve is parallel to Y-axis, what would be its price elasticity of demand?

Options

• e_p = 1

• e_p = α

• e_p is greater than 1

• e_p = 0

Answer 1

e_p = 0

Explanation:

When quantity demanded of a commodity does not respond to a change in its price, then the elasticity of demand is zero. In this case, the quantity demanded remains the same, irrespective of any rise or fall in the price of the commodity. No matter what the price is, the same quantity is demanded. It is a case of perfectly inelastic demand. A demand curve of zero elasticity is known as perfectly or completely inelastic demand curve.