Question : Assertion (A): Demand elasticity is greater than one below the demand curve's midpoint on a straight line with a downward slope.
Reason (R): The demand elasticity on a linear demand curve ranges from zero to infinity.
Option 1: Both Assertion (A) and Reason (R) are true and Reason (R) is the correct explanation
of Assertion (A)
Option 2: Both Assertion (A) and Reason (R) are true and Reason (R) is not the correct explanation
of Assertion (A)
Option 3: Assertion (A) is true but Reason (R) is False
Option 4: Assertion (A) is False but Reason (R) is True
Correct Answer: Assertion (A) is False but Reason (R) is True
Solution :
Below the midpoint of a straight line demand curve, elasticity is less than one and the firm wants to raise the price to increase total revenue. Above the midpoint, elasticity is greater than one and the firm wants to lower price to increase total revenue. At the midpoint, E1, elasticity is equal to one, or unit elastic.
Hence option d is the correct answer.
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