Question

If the demand curve is parallel to the y-axis then elasticity of demand is

• A. zero
• B. one
• C. more than one
• D. less than one

Hint:

Visualize the axes. A vertical line (parallel to the Y-axis/Price axis) means the quantity (on the X-axis) is fixed and unresponsive. Hence, the elasticity is ZERO.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
A demand curve parallel to the y-axis is a vertical straight line. This graphical representation shows that the quantity demanded of a commodity remains constant, regardless of any change in its price.

Step 2: Key Formula or Approach:
The formula for price elasticity of demand (\(E_d\)) is: \[ E_d = \frac{\text{Percentage Change in Quantity Demanded}}{\text{Percentage Change in Price}} = \frac{%\Delta Q_d}{%\Delta P} \]

Step 3: Detailed Explanation:
For a demand curve parallel to the y-axis, the quantity demanded does not change at all as the price changes. This means the change in quantity demanded (\(\Delta Q_d\)) is zero. Substituting this into the formula: \[ E_d = \frac{0}{%\Delta P} = 0 \] This situation is known as perfectly inelastic demand. It typically applies to absolute necessities like life-saving drugs, where consumers will buy the same quantity irrespective of the price.

Step 4: Final Answer:
When the demand curve is parallel to the y-axis, the elasticity of demand is zero. Thus, option (A) is the correct answer.