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2 December, 06:42

In which of these instances is demand said to be perfectly inelastic?

a. An increase in price of 2% causes a decrease in quantity demanded of 2%.

b. A decrease in price of 2% causes an increase in quantity demanded of 0%.

c. A decrease in price of 2% causes a decrease in total revenue of 0%.

d. An increase in price of 2% causes a decrease in quantity demanded of 1/2%.

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  1. 2 December, 06:58
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    b. A decrease in price of 2% causes an increase in quantity demanded of 0%.

    Explanation:

    By definition, the demand is said to be perfectly inelastic when no matter how much the price of a good changes, you will still be consuming the same exact amount as you did before the price changed.

    Keeping this in mind, we know that the price may increase or decrease in 2%, but the demanded quantity will not have any change at all (people won't consume less or more).

    So, now we know that the correct answer is b, because a decrease in price of 2% causes an increase in quantity demanded of 0% - in other words, people's purchase decision weren't influenced by the change in the price.
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