The demand curve of a commodity is a straight line sloping downward as in the diagram. Write true or false against the following statements.
(i) Elasticity of Demand is low corresponding to lower level of price of the commodity.
(ii) Elasticity of Demand = 0, when price = 0
(iii) Elasticity of Demand at point D < Elasticity of Demand at point C.
(i) Given statement is true. We know,
Lower Segment from a Given Point on Demand Curve
Ed=---------------------------------------------------------------------------
Upper Segment from a Given Point on Demand Curve
At a lower level of price, lower segment tends to decrease while upper segment tends to increase, implying that Elasticity of Demand reduces as price tends to be lower than before.
(ii) Given statement is true. Price = 0, at point B. Ed at point B =0/AB= 0
Elasticity of Demand = 0, when price = 0
(in) Given statement is true because DB/AD< CB/AC
:. Elasticity of Demand at point D < Elasticity of Demand at point C.