Question

om/courses/2456531/quizzes/5192042/take Question 6 1 pts The price elasticity of demand for a completely vertical demand curve is unitary elastic O perfectly elastic O elastic O perfectly inelastic 1 pts Question 7 If a 3 percent reduction in the price of a good produces a 5 percent increase in the quantity demanded, the price elasticity of demand over this range of the demand curve is unitary elastic

Answer 1

Problem 6

In case of a vertical demand curve, change in quantity demanded will be 0% irrespective of change in price,

Price elasticity of demand=Percentage change in quantity/Percentage change in price

=0/Percentage change in price=0

We can say that price demand is perfectly inelastic in this case.

Option d) Perfectly inelastic is correct.

Problem 7

Percentage change in quantity=+5%

Percentage change in price=-3%

Price elasticity of demand=Percentage change in quantity/Percentage change in price=5%/(-3%)=-1.67

Absolute value of price elasticity of demand is more than 1, we can say that demand is Relatively Elastic.