If Demand Is Perfectly Inelastic, What Is the Absolute Value

question 202

Multiple Choice

If demand is perfectly inelastic, what is the absolute value of the price elasticity coefficient?

• A)Infinity
• B)Zero
• C)More than one
• D)Equal to the absolute value of the slope of the demand curve

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Definitions:

Law of Diminishing Returns

The principle that as investment in a single factor of production increases, holding all others constant, the incremental gains in output will eventually decrease.

Law of Diminishing Marginal Utility

states that as a person consumes more of a good or service, the utility (satisfaction) gained from each additional unit decreases.

Principal-agent Problem

A dilemma occurring when one person or entity (the agent), is able to make decisions on behalf of, or that impact, another person or entity: the principal.

Complementary Resource

A good or service that enhances the use or value of another good or service when the two are used together.