Concept:Price elasticity of demand measures how much quantity demanded responds to a change in price.
A perfectly inelastic demand occurs when quantity demanded does not change at all, regardless of price changes.
Explanation:The demand curve in the diagram is a vertical line.
A vertical demand curve means that at every price level, the quantity demanded remains the same.
When price rises or falls, consumers still buy exactly the same quantity.
Therefore, the percentage change in quantity demanded is zero while the percentage change in price is positive.
Using the elasticity formula,
Ed=%ΔP%ΔQd=%ΔP0=0.Since the value of elasticity is zero, the demand is described as perfectly inelastic.
This type of demand curve is also called an abnormal demand curve because it violates the normal downward-sloping shape.
Answer:The diagram represents perfectly inelastic demand.
Correct option: A. perfectly inelastic demand.
