Which of the following statements about constant-elasticity demand curves is NOT correct?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → On a horizontal demand curve, demand is the same at every price.
On a horizontal demand curve, it is the price that stays the same, whatever the quantity. At any other price, demand drops to zero.
Option (1) On a horizontal demand curve, demand is the same at every price. — False. Demand can be any amount at the one price, and it is zero at any other price.
Option (2) On a vertical demand curve, |eD| is always 0. — True. A price change never changes demand on a vertical curve, so it is perfectly inelastic.
Option (3) On a rectangular hyperbola demand curve, |eD| is 1 at every point. — True. A given % change in price always brings an equal % change in quantity.
Option (4) A horizontal demand curve is perfectly elastic. — True. Elasticity is infinite on a horizontal curve.
NCERT (2026-27): “Constant Elasticity Demand Curve … Consider, for example, a vertical demand curve as the one depicted in Figure 2.20(a). … A price never leads to a change in the demand for such a demand curve and |eD| is always 0. Therefore, a vertical demand curve is perfectly inelastic.” “Figure 2.20 (b) depics a horizontal demand curve, where market price remains constant at P, whatever be the level of demand for the commodity. … A horizontal demand curve is perfectly elastic. …” “Figure 2.20(c) depicts a demand curve which has the shape of a rectangular hyperbola. This demand curve has a property that a percentage change in price along the demand curve always leads to equal percentage change in quantity. Therefore, |eD| = 1 at every point on this demand curve. This demand curve is called the unitary elastic demand curve.” |