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In the case of a straight line demand curve meeting the two axes, the price elasticity of demand at y-axis of the line would be equal to
- a)1
- b)infinity
- c)3
- d)1.25
Correct answer is option 'B'. Can you explain this answer?
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In the case of a straight line demand curve meeting the two axes, the ...
**Price Elasticity of Demand**
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
**Straight Line Demand Curve**
A straight line demand curve is a linear representation of the relationship between price and quantity demanded. It implies a constant slope, which means the percentage change in quantity demanded is proportional to the percentage change in price.
**Elasticity at the Y-Axis**
When the demand curve meets the y-axis, it indicates that the quantity demanded is zero at that price. In other words, the price is so high that no one is willing to purchase the product.
At this point, the demand curve is perfectly elastic because any increase in price will lead to a complete elimination of demand. The demand curve is vertical, indicating an infinite price elasticity of demand.
**Explanation**
The price elasticity of demand at the y-axis of a straight line demand curve is equal to infinity. This is because the percentage change in quantity demanded is infinitely large compared to any percentage change in price.
When the price increases even slightly from zero, the quantity demanded drops to zero. This indicates an infinitely elastic response to any change in price.
Therefore, option B - infinity is the correct answer.
Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.
**Straight Line Demand Curve**
A straight line demand curve is a linear representation of the relationship between price and quantity demanded. It implies a constant slope, which means the percentage change in quantity demanded is proportional to the percentage change in price.
**Elasticity at the Y-Axis**
When the demand curve meets the y-axis, it indicates that the quantity demanded is zero at that price. In other words, the price is so high that no one is willing to purchase the product.
At this point, the demand curve is perfectly elastic because any increase in price will lead to a complete elimination of demand. The demand curve is vertical, indicating an infinite price elasticity of demand.
**Explanation**
The price elasticity of demand at the y-axis of a straight line demand curve is equal to infinity. This is because the percentage change in quantity demanded is infinitely large compared to any percentage change in price.
When the price increases even slightly from zero, the quantity demanded drops to zero. This indicates an infinitely elastic response to any change in price.
Therefore, option B - infinity is the correct answer.
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