If the demand elasticity coefficient of cars is 0.5; it implies that the demand for petrol is?

A. elastic
B. perfectly inelastic
C. inelastic
D. perfect elastic

Correct Answer:

Option C – inelastic

Explanation

If the demand elasticity coefficient is less than 1, that is (0.4, 0.5, etc) it means the demand is inelastic. This means that the change in price had little impact on the quantity demanded.