Question

If the demand curve for a good is vertical, then what would be the elasticity of demand \( |e_d| \)?

• A. \( |e_d| = 1 \)
• B. \( |e_d| = 0 \)
• C. \( |e_d| = \infty \)
• D. \( |e_d|<1 \)

Hint:

A vertical demand curve represents perfectly inelastic demand, where the quantity demanded does not change with a price change.

Answer 1

The Correct Option is B

Step 1: Understanding the concept of elasticity of demand.
Elasticity of demand (\( e_d \)) measures how the quantity demanded of a good responds to changes in price. If the demand curve is vertical, the quantity demanded does not change regardless of the price change. This implies that the price elasticity of demand is zero.

Step 2: Analysis of options.
(A) \( |e_d| = 1 \): This would imply unitary elasticity, where the percentage change in quantity demanded equals the percentage change in price. This is not the case for a vertical demand curve.
(B) \( |e_d| = 0 \): Correct. A vertical demand curve indicates perfectly inelastic demand, meaning the quantity demanded does not change as price changes, so \( |e_d| = 0 \).
(C) \( |e_d| = \infty \): This would suggest perfectly elastic demand, where any change in price results in an infinite change in quantity demanded, which is not true for a vertical demand curve.
(D) \( |e_d|<1 \): This suggests inelastic demand, but for a vertical demand curve, demand is perfectly inelastic.

Step 3: Conclusion.
The correct answer is (B) \( |e_d| = 0 \), as a vertical demand curve represents perfectly inelastic demand.