Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Demand will decrease significantly with any price increase.
B
Quantity demanded remains constant regardless of price changes.
C
Consumers will stop purchasing the good if the price rises.
D
Demand is sensitive to price changes.
Understanding the Answer
Let's break down why this is correct
Answer
When demand is perfectly inelastic, the amount of the good that people want to buy never changes, no matter what the price is. This means that if the price goes up or down, the quantity demanded stays exactly the same. Because the quantity is fixed, raising the price will increase total revenue, while lowering the price will decrease revenue, but the number of units sold remains unchanged. For example, if a coffee shop raises the price of a latte from $3 to $5, customers will still buy the same number of lattes, so the shop earns more money but sells the same quantity. Thus, the true statement is that quantity demanded is constant regardless of price changes.
Detailed Explanation
When demand is perfectly inelastic, the quantity demanded does not change no matter how the price moves. Other options are incorrect because The idea that demand will drop sharply with a price rise is a common mistake; Stopping purchases when the price rises is another misconception.
Key Concepts
perfectly inelastic demand
price changes
Topic
Price Elasticity of Demand
Difficulty
medium level question
Cognitive Level
understand
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