If demand is price inelastic, then
a. buyers do not respond much to a change in price.
b. buyers respond substantially to a change in price, but the response is very slow.
c. the demand curve is very flat.
d. nothing happens.
The correct answer and explanation is :
The correct answer is:
a. buyers do not respond much to a change in price.
Explanation:
Price elasticity of demand refers to the degree to which the quantity demanded of a good responds to changes in its price. In the context of inelastic demand, the quantity demanded changes very little or not at all when there is a price change. This concept is often discussed in terms of price elasticity of demand (PED), where the elasticity coefficient is less than 1 (|PED| < 1).
When demand is price inelastic, it means that consumers’ purchasing behavior is not very sensitive to price changes. This occurs because the good in question is typically a necessity, has few or no close substitutes, or is relatively inexpensive relative to a consumer’s income. For example, products like basic medications or utilities (such as water or electricity) tend to have inelastic demand because consumers will still buy them even if prices increase.
In the case of inelastic demand, a price increase will lead to a relatively small decrease in the quantity demanded. Conversely, a price decrease will not lead to a significant increase in demand. This is contrary to elastic demand (where the absolute value of PED is greater than 1), where consumers are very responsive to price changes.
Now, let’s review the other options:
- b. Buyers respond substantially to a change in price, but the response is very slow: This is incorrect because inelastic demand implies a minimal response to price changes, not a substantial one.
- c. The demand curve is very flat: A flat demand curve represents elastic demand, where consumers are highly responsive to price changes. Inelastic demand typically has a steep demand curve, reflecting that quantity demanded changes little with price changes.
- d. Nothing happens: This is also incorrect. While the demand may not change much, it still changes somewhat in response to price changes, though the change is small.
In summary, inelastic demand indicates that buyers do not significantly alter their purchasing habits in response to price changes.