Zero price elasticity of demand means

The correct answer is option 1, i.e. whatever the change in price, there is absolutely no change in demand.

Key Points

The degree to which the effective desire for something (goods or service) changes as its price changes is called Price elasticity of demand, or simply called Elasticity. In general, as things become more expensive, people desire those things less.

• The  PED coefficient's numerical values could range from zero to infinity.
  • Generally, when the PED is less than one (in absolute value), the demand for a good is said to be inelastic (or relatively inelastic): i.e., changes in price will have a less than the proportional effect on the quantity of the good demanded.
  • When goods PED is greater than one, the demand for it is said to be elastic (or relatively elastic). i.e., changes in price have more than the proportional effect on the quantity of good demand.
  • A PED coefficient equal to one indicates demand that is unit elastic; any change in price leads to an exactly proportional change in demand (i.e. there would be a 1% reduction in price if there is a 1% reduction in demand).
  • When the goods PED coefficient is equal to zero there will be perfectly inelastic demand. i.e., demand for a good does not change in response to price.
• Hence Option 1 is correct.
  • Finally, when the PED coefficient is equal to infinity, demand is said to be perfectly elastic. i.e., buyers will only buy at one price and no other.