Read the following statements carefully.
Statement I: The price elasticity of demand at a point on a straight-line demand curve is the ratio of its lower segment to its upper segment at that point.
Statement II: At a point where the lower segment is twice the upper segment, the demand is elastic.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Both Statement I and Statement II are true.
On a straight-line demand curve, elasticity at a point = lower segment ÷ upper segment.
Statement I: The price elasticity of demand at a point on a straight-line demand curve is the ratio of its lower segment to its upper segment at that point. — True. This is the geometric measure of elasticity.
Statement II: At a point where the lower segment is twice the upper segment, the demand is elastic. — True. Elasticity = 2 / 1 = 2, which is more than 1. Such a point lies to the left of the midpoint, where demand is elastic.
NCERT (2026-27): “Geometric Measure of Elasticity along a Linear Demand Curve The elasticity of a linear demand curve can easily be measured geometrically. The elasticity of demand at any point on a straight line demand curve is given by the ratio of the lower segment and the upper segment of the demand curve at that point. …” “The elasticity of demand at different points on a straight line demand curve can be derived by this method. Elasticity is 0 at the point where the demand curve meets the horizontal axis … At the midpoint of the demand curve, the elasticity is 1, at any point to the left of the midpoint, it is greater than 1 and at any point to the right, it is less than 1. …” |