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 elasticity of demand on a linear demand curve ranges from 0 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 :
Elasticity is less than one below the midpoint of a straight-line demand curve, and the firm wishes to raise prices to boost overall revenue. Elasticity is larger than one above the midpoint, and the company wants to cut prices to boost overall revenue. E1 is equal to one, or unit elastic, at the midpoint.
Elasticity ranges from zero to infinity and the value is given different names over different numerical ranges as summarised in the table below.
Hence option d is the correct answer.
