alleryOn a linear (straight-line) demand curve, at what location is the price elasticity of demand equal to one?
AAt the point touching the quantity axis
BAt the point touching the price axis
CAt the mid-point of the curve
DIt is equal to one everywhere on it
Answer & Solution
Correct answer: C. At the mid-point of the curve
1. The slope of a linear demand curve is constant, but elasticity varies along it.
2. At the point touching the price axis (top, t) elasticity is infinity, and at the quantity axis (T) it is zero.
3. As we move from T towards t, elasticity rises through these values.
4. Exactly at the mid-point, elasticity equals one.
_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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