Question : Demand elasticity at the midpoint of a straight line demand curve:
Option 1: Will be unity
Option 2: Will be zero
Option 3: Will be infinity
Option 4: None of these
Answer (1)
24th Jan, 2024
Correct Answer: Will be unity
Solution :
Elasticity is less than one below the midpoint of a straight line demand curve, and the firm wants to raise prices to increase total revenue. Above the midpoint, elasticity exceeds one, and the firm wishes to lower prices in order to increase total revenue. Elasticity is equal to one, or unit elastic, at the midpoint, E1.
As a result, option A is the correct answer.
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