Question:
The market demand curve for a certain product is drawn in the diagram below. [Linear downward sloping curve with Price Rs. 10 and 8 and Quantities Q1 and Q2] Between the price of Rs. 10 and Rs. 8, the demand curve shown in the above diagram is
(1) perfectly elastic.
(2) relatively elastic.
(3) relatively inelastic.
(4) unitary elastic.
(5) perfectly inelastic.
Correct Answer:
(2)
Answer Explanation:
On a downward-sloping linear demand curve, the upper half (above the midpoint) is always relatively elastic (PED > 1), the midpoint is unitary elastic (PED = 1), and the lower half is relatively inelastic (PED < 1). Higher prices like 10 and 8 fall on the upper elastic portion.
Topic: Elasticity Year: 2022
Leave a Reply