Question : When the price elasticity of demand is less than 1, the demand is:
Option 1: Inelastic
Option 2: Unitary elastic
Option 3: Perfectly elastic
Option 4: Elastic
Correct Answer: Inelastic
Solution : The correct answer is (a) Inelastic
When the price elasticity of demand is less than 1, the demand is considered inelastic. Inelastic demand means that the quantity demanded is not very responsive to changes in price. A small percentage change in price leads to a proportionately smaller percentage change in quantity demanded. In other words, when the price changes, the quantity demanded changes to a lesser extent. This indicates that consumers are less sensitive to price changes, and the demand for the good is relatively unaffected by price fluctuations.
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