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Chapter 5: Q.13 (page 130)

Describe the general appearance of a demand or a supply curve with zero elasticity.

Short Answer

Expert verified

A demand or supply curve with zero elasticity is vertical in shape.

Step by step solution

01

Step 1. Introduction:

Zero elasticity is also referred to as perfect inelasticity. It is a situation in which a percentage variation in price, irrespective of size, leads to a zero variation in quantity.

02

Step 2. Explanation:

As the amount of quantity demanded or supplied remains the same irrespective of the prevailing price level, a demand or supply curve with zero elasticity is vertical in shape. The shape of demand and supply curves with zero elasticity is illustrated in the figure below:

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Most popular questions from this chapter

Under which circumstances does the tax burden fall entirely on consumers?

Transatlantic air travel in business class has an estimated elasticity of demand of 0.62, while transatlantic air travel in economy class has an estimated price elasticity of 0.12. Why do you think this is the case?

The equation for a supply curve is 4P = Q. What is the elasticity of supply as price rises from 3 to 4? What is the elasticity of supply as the price rises from 7 to 8? Would you expect these answers to be the same?

The equation for a demand curve is P = 2/Q. What is the elasticity of demand as price falls from 5 to 4? What is the elasticity of demand as the price falls from 9 to 8? Would you expect these answers to be the same?

Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run.

a. if the price of heating oil rises from \(1.80 to \)2.20 per gallon, what happens to the quantity of heating oil demanded in the short run? In the long run? (Use the midpoint method in your calculations.)

b. Why might this elasticity depend on the time horizon?
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