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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

What is the price elasticity of supply? Can you explain it in your own words?

A city has built a bridge over a river and it decides to charge a toll to everyone who crosses. For one year, the city charges a variety of different tolls and records information on how many drivers cross the bridge. The city thus gathers information about the elasticity of demand. If the city wishes to raise as much revenue as possible from the tolls, where will the city decide to charge a toll: in the inelastic portion of the demand curve, the elastic portion of the demand curve, or the unit elastic portion? Explain.

Suppose the cross-price elasticity of apples with respect to the price of oranges is 0.4, and the price of oranges falls by 3%. What will happen to the demand for apples?

From the data in Table 5.5 about demand for smart phones, calculate the price elasticity of demand from: point B to point C, point D to point E, and point G to point H. Classify the elasticity at each point as elastic, inelastic, or unit elastic.

PointsPQ
A603,000
B702,800
C802,600
D902,400
E1002,200
F1102,000
G1201,800
H1301,600

Suppose that business travellers and vacationers have the following demand for airline tickets from Chicago to Miami:

Price

Quantity Demanded (business travellers)

Quantity Demanded (vacationers)

\(150

2,100 tickets

1,000 tickets

200

2,000

800

250

1,900

600

300

1,800

400

  1. As the price of tickets rises from \)200 to $250, what is the price elasticity of demand for (i) business travellers and (ii) vacationers? (Use the midpoint method in your calculations.)
  2. Why might vacationers have a different elasticity from business travellers?
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