Question

In the following diagram, AE is the linear demand curve of a commodity. On the basis of the given diagram state whether the following statement is True or False. Give a reason for your answer.

Demand at point ‘D’ is perfectly inelastic demand.

On the basis of the given diagram, state whether the following statement is True or False: 

Demand at point ‘D’ is perfectly inelastic demand.

Options

• True

• False

Answer 1

This statement is False.

Reason:

The length of the lower segment is equal to the upper segment at point D. Therefore, Ed = 1. Thus, at point D, demand is unitary elastic.