When the price elasticity of demand equals zero, the demand curve is

• A. Horizontal
• B. Vertical
• C. Diagonal
• D. Curved

Answer: (B)

The main idea is perfectly inelastic demand. When price elasticity of demand is zero, quantity demanded does not change at all in response to price movements. That makes the demand curve vertical: as price varies along the vertical axis, the quantity demanded on the horizontal axis remains fixed. This happens because the good is essentially unavoidable or has no substitutes in the short run, so consumers keep buying the same amount despite price changes. The elasticity formula supports this: elasticity = (percentage change in quantity) divided by (percentage change in price); if quantity doesn’t change, the numerator is zero and elasticity is zero, regardless of how big the price change is. A horizontal curve would imply the opposite—perfectly elastic demand—while a diagonal or curved curve indicates some degree of responsiveness, not zero.