Micro

Market Equilibrium

Hard

Let us consider a linear demand curve $q = a - bp$ . On the same demand curve, arrange the elasticity in ascending 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:

(A), (B), (C), (D)

(D), (B), (A), (C)

(B), (A), (D), (C)

(C), (B), (D), (A)

✅ Correct Option: 2

For a linear demand curve:

$q = a - bp$

Elasticity of demand:

$e_d = \dfrac{dq}{dp} \cdot \dfrac{p}{q}$

$= (-b) \cdot \dfrac{p}{a - bp}$

At different points on the same demand curve:

At $p = 0$

$e_d = 0$

Thus, $|e_d| = 0$ → (D)

In the lower portion of the curve:

$|e_d| < 1$ → (B)

At midpoint:

$|e_d| = 1$ → (A)

In the upper portion:

$|e_d| > 1$ → (C)

Arranging in ascending order:

$(D), (B), (A), (C)$

Correct answer: Option 2

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Choose the correct answer from the options given below:

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Solution