Question

When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is Your answer: perfectly inelastic b perfectly elastic c inelastic d unitary elastic

Answer 1

Answer-option a. Perfectly inelastic

Price elasticity of demand measures degree of responsiveness of the quantity demanded of a commodity to a change in it's price. When the quantity demanded of a commodity does not respond to a change in its price,then elasticity of demand is zero. In this case, the quantity demanded remains the same irrespective of any rise or fall in the price of the commodity. The same amount of commodity is being purchased no matter what the price is. Hence , when quantity demanded of a commodity does not change with respect to change in the price of the commodity, price elasticity is said to be PERFECTLY INELASTIC.

Option b is incorrect because price elasticity of demand is said to be perfectly elastic when a very small change in the price of the commodity causes the quantity demanded of the commodity to change by infinity ( i.e.,by very large amount). Here, in the question, quantity demanded is unchanged as a result of an increase in the price of fish by 10% . Hence, price elasticity of demand is not perfectly elastic.

Option c is incorrect because price elasticity of demand is said to be Inelastic when the percentage change in the quantity demanded of a commodity is less than percentage change in price. Here, quantity demanded changes by a smaller proportion than change in price. Here, in the question, quantity demanded is unchanged as a result of a 10% increase in the price of fish . Hence, price elasticity of demand is not inelastic.

Option d is Incorrect because price elasticity of demand is said to be unitary elastic when percentage change in price causes an equivalent percentage change in the quantity demanded of a commodity. Here, in the question,a 10% increase in price does not lead to any change in the quantity demanded. Hence, price elasticity of demand is not unitary elastic.