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gillgill
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What must be true about the demand function if E=0?
i know that E=0 is perfectly inelastic. What is it about the demand function?
i know that E=0 is perfectly inelastic. What is it about the demand function?
gillgill said:What must be true about the demand function if E=0?
i know that E=0 is perfectly inelastic. What is it about the demand function?
When E=0, it means that there is no change in demand when there is a change in price. This indicates that the demand is perfectly inelastic, meaning that consumers are not sensitive to changes in price and will continue to purchase the same quantity regardless of price fluctuations.
Yes, the demand function can have an elasticity of 0. This occurs when there is no change in quantity demanded for a given change in price. It is an indication of perfect inelasticity, where consumers are not at all responsive to changes in price.
A demand function can have an elasticity of 0 due to several factors, including a lack of close substitutes for the product, consumer habits and preferences, and necessity goods. These factors make consumers less likely to change their purchasing behavior in response to price changes, resulting in a low or zero elasticity.
Not necessarily. While E=0 indicates that there is no change in demand for a given change in price, it also means that the business has limited pricing power. This means that the business cannot increase profits by raising prices, and may struggle to compete with other businesses that offer similar products at lower prices.
E=0 indicates that the business has little to no control over demand based on price changes. As a result, the business may need to focus on non-price factors, such as product quality and branding, to attract and retain customers. It may also need to find ways to reduce costs in order to maintain profits without relying on price increases.