If the elasticity is between 0 and 1, demand is

If the elasticity is between 0 and 1, demand is

• A. Demand is inelastic.
• B. Demand is elastic.
• C. Demand is perfectly elastic.
• D. Demand is unit elastic.

Answer: (A)

Elasticity of demand measures how responsive buyers are to price changes. When the elasticity value is between 0 and 1, the percentage change in quantity demanded is smaller than the percentage change in price. That makes demand inelastic: consumers don’t cut back much when price rises, so total revenue tends to move in the same direction as the price. If price goes up, revenue goes up; if price goes down, revenue goes down. This isn’t consistent with being elastic (where quantity responds a lot to price), nor with being perfectly elastic (an infinite response), nor with unit elastic (where quantity changes by the same percentage as price, keeping total revenue roughly unchanged).

Elasticity of demand measures how responsive buyers are to price changes. When the elasticity value is between 0 and 1, the percentage change in quantity demanded is smaller than the percentage change in price. That makes demand inelastic: consumers don’t cut back much when price rises, so total revenue tends to move in the same direction as the price. If price goes up, revenue goes up; if price goes down, revenue goes down.

This isn’t consistent with being elastic (where quantity responds a lot to price), nor with being perfectly elastic (an infinite response), nor with unit elastic (where quantity changes by the same percentage as price, keeping total revenue roughly unchanged).