The correct option is
B. Perfectly inelastic.
Explanation of the Correct Answer
- Understanding Elasticity: Elasticity in economics measures how much the quantity demanded of a good responds to changes in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
[
\text{Price Elasticity of Demand (PED)} = \frac{\%\text{ Change in Quantity Demanded}}{\%\text{ Change in Price}}
]
-
Zero Elasticity: When elasticity is zero, it means that the quantity demanded does not change at all when the price changes. This situation is referred to as "perfectly inelastic" demand. In other words, consumers will buy the same amount of the good regardless of its price.
-
Graphical Representation: On a graph, a perfectly inelastic demand curve is represented as a vertical line. This indicates that no matter how high or low the price goes, the quantity demanded remains constant. For example, if a life-saving medication is priced at $100 or $1,000, people will still need the same amount, leading to a vertical demand curve.
-
Real-World Examples: Common examples of perfectly inelastic goods include essential medications, basic food items, or other necessities where consumers have no substitutes and must purchase regardless of price changes.
Why the Other Options Are Incorrect
-
A. Perfectly Elastic: This option describes a situation where the quantity demanded changes infinitely with any change in price. The demand curve for perfectly elastic demand is horizontal. If the price increases even slightly, the quantity demanded drops to zero. This is the opposite of perfectly inelastic demand, where quantity demanded remains unchanged regardless of price.
-
C. Concave: A concave demand curve does not represent a specific type of elasticity. Demand curves can be concave or convex depending on the nature of the good and consumer preferences, but they do not imply a specific elasticity value. A concave curve typically indicates diminishing marginal utility but does not equate to zero elasticity.
-
D. Downward Sloping: While most demand curves are downward sloping (indicating that as price decreases, quantity demanded increases), a downward sloping curve does not imply zero elasticity. A downward sloping curve can have varying elasticities, including elastic, unitary elastic, and inelastic demand. Therefore, this option does not accurately describe a situation where elasticity is zero.
Summary of Key Points
- Perfectly inelastic demand means quantity demanded does not change with price changes (elasticity = 0).
- The demand curve for perfectly inelastic goods is a vertical line on a graph.
- Examples include essential goods with no substitutes, like life-saving medications.
- Other options (perfectly elastic, concave, downward sloping) do not accurately describe a situation of zero elasticity.
This understanding of elasticity is crucial for analyzing consumer behavior and market dynamics in economics.