Arrange the following of elasticities of demand in increasing order as per geometric method.

A. Mid-Point of the demand curve

B. Intercept of Y-axis

C. Between Mid-Point and intercept on X-axis.

D. Between Mid-Point and intercept on Y-axis.

E. Intercept on X-axis.

Choose the correct answer from the options given below :

E, C, A ,D, B

The correct answer is option (4) : E, C, A ,D, B

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 and it is ∝ at the point where the demand curve meets the vertical 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.

Explanation :

1. Intercept on X-axis (E): This represents perfectly inelastic demand. The quantity demanded is zero regardless of price changes, so the segment length is zero. (Perfectly elastic demand )

2. Between Mid-Point and intercept on X-axis (C-): As we move away from the X-axis intercept, the price is higher, and the quantity demanded is slightly greater than zero. The segment length will be small but positive. (less than 1)

3. Mid-Point of the demand curve (A): This is where the proportionate changes in price and quantity are equal, potentially indicating unit elasticity. The segment length above and below the midpoint would be the same. (Unitary elastic demand)

4. Between Mid-Point and intercept on Y-axis (D): As we move up from the midpoint, the price goes down, and the quantity demanded increases. The segment length below the midpoint will be larger than the segment length above. This indicates demand is elastic (greater than 1).

5. Intercept on Y-axis (B): This represents perfectly inelastic demand. The price can be any value, but the quantity demanded is infinitely large. The segment length above the intercept is infinite.