4. Unitary Elastic Demand rarely occurs in practice. State whether the following statements are TRUE and FALSE.

State whether the following statements are TRUE and FALSE.

4. Unitary Elastic Demand rarely occurs in practice.

Answer: 

TRUE

Unitary elasticity implies that a certain percentage increase in price is offset by equal percentage decrease in demand. If price of a good rises by two times, then the demand for the good gets halved. Similarly, a percentage decrease in price is offset by an equal percentage increase in demand for the good. Such an exact behaviour rarely occurs in practice.

2. Perfectly inelastic demand curve is parallel to the X axis. State whether the following statements are TRUE and FALSE.

State whether the following statements are TRUE and FALSE.

2. Perfectly inelastic demand curve is parallel to the X axis.

Answer: 

FALSE

Perfectly inelastic demand implies that the demand for the commodity is completely unresponsive to the change in the price of the commodity. That is, a change in price has no effect on the demand. A specific quantity of the good would be demanded no matter the price. In such cases, the demand curve is vertical line parallel to Y axis.