Inelastic demand is when the quantity demanded changes by a smaller percentage than the change in price; |PED|

Inelastic demand is when the quantity demanded changes by a smaller percentage than the change in price; |PED|

• A. > 1
• B. < 1
• C. = 0
• D. = 1

Answer: (B)

When we look at inelastic demand, we’re examining how responsive buyers are to price changes. The measure is the price elasticity of demand, defined as the percentage change in quantity demanded divided by the percentage change in price (in absolute value). If this ratio is less than 1, quantity demanded changes by a smaller percentage than the price, so demand is inelastic. That’s why the statement that the elasticity is less than one best fits inelastic demand. To connect the ideas: an elasticity greater than 1 means demand is elastic (big response to price changes), elasticity equal to 1 means unit elastic (proportional response), and an elasticity of 0 would be perfectly inelastic (quantity doesn’t respond at all).

When we look at inelastic demand, we’re examining how responsive buyers are to price changes. The measure is the price elasticity of demand, defined as the percentage change in quantity demanded divided by the percentage change in price (in absolute value). If this ratio is less than 1, quantity demanded changes by a smaller percentage than the price, so demand is inelastic. That’s why the statement that the elasticity is less than one best fits inelastic demand.

To connect the ideas: an elasticity greater than 1 means demand is elastic (big response to price changes), elasticity equal to 1 means unit elastic (proportional response), and an elasticity of 0 would be perfectly inelastic (quantity doesn’t respond at all).