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On a straight-line demand curve tT, the point elasticity at any point R is given by the ratio of which two segments?
ATotal length tT to lower segment RT
BUpper segment Rt to lower segment RT
CLower segment RT to upper segment Rt
DUpper segment Rt to total length tT
Answer & Solution
Correct answer: C. Lower segment RT to upper segment Rt
1. For a linear demand curve, point elasticity at R uses the geometric method.
2. The formula is $\dfrac{RT}{Rt} = \dfrac{\text{lower segment}}{\text{upper segment}}$.
3. The numerator is the lower segment and the denominator is the upper segment.
4. So elasticity equals lower segment RT divided by upper segment Rt.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 2 Unit I "Law of Demand and Elasticity of Demand", p.20_
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