Arrange the following degrees of elasticity on a linear demand curve in the descending order.
(A) $e_d> 1$
(B) $e_d=1$
(C) $e_d< 1$
(D) $e_d=0 $
Choose the correct answer from the options given below :
Answer & explanation
Correct answer: option 4
The correct answer is option (4) : (A), (B), (C), (D)
Degrees of elasticity on a linear demand curve in the descending order is :
Elastic Demand (A) : Demand is elastic when the percentage change in quantity demanded is greater than the percentage change in price. Elasticity of demand is greater than 1.
Unitary Elastic Demand (B) : Percentage change in quantity demanded is equal to the percentage change in price. Elasticity of demand is exactly 1.
Inelastic Demand (C) : quantity demanded is relatively less responsive to price changes. Elasticity of demand is between 0 and 1.
Perfectly Inelastic Demand (D) : Quantity demanded remains constant regardless of price changes. The elasticity of demand is zero.