00:01
So here we've got this unique situation, right? the price of salt is going down, but there's no change in the quantity of the salt.
00:07
If we think of that in terms of elasticity, which is the percent change in quantity over the percent percent change in price, we get zero over minus 10 percent equals zero, or what we would call perfectly inelastic.
00:28
What kind of demand curve do we need to draw to get this sort of reaction? so a demand curve is a relationship between price and quantity.
00:37
If we try drawing a normal demand curve, right, you'll see that as the price falls, the quantity responds.
00:45
So this can't be right, right? we need a very extreme demand curve.
00:50
Once you realize that we need an extreme demand curve, there are only two options, right? the correct one here is the vertical.
01:00
If demand is vertical and the price goes down, the quantity does not change.
01:06
So it must be the case that salt here is perfectly inelastic demand curve.
01:12
That's the only sort of possible outcome.
01:18
So that's the first part of the question.
01:20
The second part is a weird question that asks about price theory.
01:25
And, what price theory is...