Maharashtra Board Class 12 Economics Chapter 4 Supply Analysis Solutions

1. Complete The Following Statements:

Question 1. Price elasticity of demand on a linear demand curve at the X-axis is ............
(a) zero
(b) one
(c) infinity
(d) less than one
Answer: (a) zero
In simple words: At the X-axis intercept of a linear demand curve, the quantity demanded is maximum, and price elasticity of demand is zero, meaning demand is perfectly inelastic.

🎯 Exam Tip: Remember the elasticity values at the extreme points of a linear demand curve: zero at the X-axis (quantity intercept) and infinity at the Y-axis (price intercept).

 

Question 2. Price elasticity of demand on a linear demand curve at the Y-axis is equal to
(a) zero
(b) one
(c) infinity
(d) greater than one
Answer: (c) infinity
In simple words: At the Y-axis intercept of a linear demand curve, the price is maximum (quantity is zero), and a tiny change in price leads to an infinite change in quantity demanded, hence elasticity is infinity.

🎯 Exam Tip: Understanding the elasticity at intercepts helps in graphically analyzing demand behavior, especially for perfect elasticity or inelasticity.

 

Question 3. Demand curve is parallel to X axis, in case of ............
(a) perfectly elastic demand
(b) perfectly inelastic demand
(c) relatively elastic demand
(d) relatively inelastic demand
Answer: (a) perfectly elastic demand
In simple words: A demand curve parallel to the X-axis signifies that consumers will buy an infinite quantity at a specific price, but nothing at a slightly higher price, indicating perfectly elastic demand.

🎯 Exam Tip: Visualize the demand curves for different elasticity types; a horizontal line (parallel to X-axis) always represents perfectly elastic demand.

 

Question 4. When percentage change in quantity demanded is more than the percentage change in price, the demand curve is ............
(a) flatter
(b) steeper
(c) rectangular
(d) horizontal
Answer: (a) flatter
In simple words: If the quantity demanded changes by a larger percentage than the price, it means consumers are very responsive to price changes, resulting in a flatter demand curve.

🎯 Exam Tip: The slope of the demand curve is a key visual indicator of elasticity; flatter curves imply greater elasticity, while steeper curves suggest less elasticity.

 

Question 5. \( Ed = 0 \) in case of ............
(a) luxuries
(b) normal goods
(c) necessities
(d) comforts
Answer: (c) necessities
In simple words: When the elasticity of demand is zero, it means quantity demanded does not change at all with price changes, which is characteristic of essential necessities like life-saving drugs or salt.

🎯 Exam Tip: Perfectly inelastic demand (`\( Ed = 0 \)`), typically applies to goods that are absolute necessities with no substitutes, highlighting their crucial role in daily life regardless of price.

2. Give Economic Terms:

 

Question 1. Degree of responsiveness of quantity demanded to change in income only.
Answer: Income elasticity
In simple words: Income elasticity measures how much the demand for a good changes in response to a change in consumers' income, assuming other factors remain constant.

🎯 Exam Tip: Focus on the "only" part in the question; if it specifies income, the answer is income elasticity. Distinguish it from price or cross elasticity.

 

Question 2. Degree of responsiveness of a change in quantity demanded of one commodity due to change in the price of another commodity.
Answer: Cross elasticity
In simple words: Cross elasticity of demand assesses how the demand for one product is affected by price changes in a different, related product, typically substitutes or complements.

🎯 Exam Tip: Pay attention to the two commodities mentioned. Cross elasticity is crucial for understanding relationships between goods (substitutes have positive, complements have negative cross elasticity).

 

Question 3. Degree of responsiveness of a change of quantity demanded of a good to a change in its price.
Answer: Elasticity of demand
In simple words: Elasticity of demand is a general term measuring how sensitive the quantity demanded of a product is to any change in its determining factors, such as price, income, or related goods' prices.

🎯 Exam Tip: This is the fundamental definition of elasticity in economics, a broad concept that encompasses various specific types like price, income, and cross elasticity.

 

Question 4. Elasticity resulting from infinite change in quantity demanded.
Answer: Perfectly elastic demand
In simple words: Perfectly elastic demand means that even the slightest change in price causes an infinite change in the quantity demanded, implying extreme sensitivity to price.

🎯 Exam Tip: Perfectly elastic demand is a theoretical concept represented by a horizontal demand curve, signifying that consumers are ready to buy any amount at a given price.

 

Question 5. Elasticity resulting from a proportionate change in quantity demanded due to a proportionate change in price.
Answer: Price elasticity
In simple words: Price elasticity specifically measures the responsiveness of the quantity demanded of a good to a change in its own price, using percentage changes for comparison.

🎯 Exam Tip: This is the most commonly discussed type of elasticity, showing how much consumer buying habits alter when a product's price moves up or down.

3. Complete The Correlation:

 

Question. Complete the correlation:
1) Perfectly elastic demand: \( Ed = \infty \) :: Perfectly inelastic demand : \( Ed = 0 \)
2) Rectangular hyperbola : Unitary elastic demand :: Steeper demand curve : Relatively inelastic demand.
3) Straight line demand curve : Linear demand curve:: Unitary elastic (convex to origin) : non linear demand curve.
4) Pen and ink : Complementary goods :: Tea or Coffee: Substitutes.
5) Ratio method : \( Ed = \frac{\%AQ}{\% \Delta P} \) :: Point or Geometric method : \( Ed = \frac{\text{Lower segment}}{\text{Upper segment}} \)
Answer:
1. Perfectly inelastic demand
2. Unitary elastic demand
3. Unitary elastic (convex to origin)
4. Complementary goods
5. Point or Geometric method
In simple words: This section correlates different concepts in elasticity, matching them based on their definitions or associated characteristics, such as the numerical value of elasticity or types of demand curves.

🎯 Exam Tip: Correlation questions test your knowledge of related economic terms. Ensure you understand the relationship between each pair of concepts provided.

4. Assertion And Reasoning Type Questions:

 

Question. Assertion (A) : Elasticity of demand explains that one variable is influenced by another variable. Reasoning (R) : The concept of elasticity of demand indicates the effect of price and changes in other factors on demand.
Options:
1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer: (3) Both (A) and (R) are True and (R) is the correct explanation of (A)
In simple words: Assertion (A) is true because elasticity generally measures responsiveness between variables, and Reasoning (R) correctly explains this by specifying that elasticity shows how demand is affected by price and other factors.

🎯 Exam Tip: For assertion-reasoning questions, first determine if A and R are individually true, then check if R logically explains A. Look for cause-and-effect relationships.

 

Question. Assertion (A): A change in quantity demanded of one commodity due to a change in the price of other commodity is cross elasticity. Reasoning (R) : Changes in consumers income leads to a change in the quantity demanded.
Options:
1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer: (4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
In simple words: Both the assertion and the reason are true statements in economics, as (A) defines cross elasticity and (R) describes income's effect on demand. However, (R) does not explain (A) because cross elasticity relates to other commodity prices, not consumer income.

🎯 Exam Tip: Even if both statements are true, ensure the reasoning directly supports or explains the assertion. If they are separate true facts, the 'not correct explanation' option is often the answer.

 

Question. Assertion (A) : Degree of price elasticity is less than one in case of relatively inelastic demand. Reasoning (R): Change in demand is less then the change in price.
Options:
1) (A) is True, but (R) is False
2) (A) is False, but (R) is True
3) Both (A) and (R) are True and (R) is the correct explanation of (A)
4) Both (A) and (R) are True and (R) is not the correct explanation of (A)
Answer: (3) Both (A) and (R) are True and (R) is the correct explanation of (A)
In simple words: Assertion (A) is true as relatively inelastic demand means the elasticity value is less than one. Reasoning (R) correctly explains this by stating that in such cases, the percentage change in quantity demanded is less than the percentage change in price.

🎯 Exam Tip: The core definition of relatively inelastic demand is that the percentage change in quantity demanded is smaller than the percentage change in price, which means the elasticity coefficient is less than one.

5. Distinguish Between:

 

Question 1. Relatively elastic demand and Relatively inelastic demand.
Answer:
Relatively Elastic Demand
1. When percentage change in quantity demanded is greater than the percentage change in price then demand is said to be Relatively Elastic demand.
2. The numerical co-efficient is greater than one (\( e > 1 \)).
3. Demand curve slopes flatter.
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक मांग वक्र (DD) को दर्शाता है जो बाएं से दाएं नीचे की ओर ढलान वाला है। ऊर्ध्वाधर अक्ष 'PRICE' (Y-अक्ष) और क्षैतिज अक्ष 'Quantity Demanded' (X-अक्ष) को दर्शाता है। कीमत में 10% बदलाव से मांग की गई मात्रा में 50% बदलाव आता है, जो यह दर्शाता है कि \( Ed > 1 \), जिससे सापेक्ष लोचदार मांग प्रदर्शित होती है। वक्र अपेक्षित रूप से सपाट है, जैसा कि लोचदार मांग के लिए होता है।
5. Example : luxury goods like LCD, TV, Car etc.

Relatively inelastic demand.
1. When percentage change in quantity demanded is less than percentage change in price then demand is said to be Relatively Inelastic demand.
2. The numerical co-efficient is less than one (\( e < 1 \)).
3. Demand curve slopes steeper.
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक मांग वक्र (DD) को दर्शाता है जो बाएं से दाएं नीचे की ओर ढलान वाला है, लेकिन अधिक खड़ी ढलान वाला है। ऊर्ध्वाधर अक्ष 'PRICE' (Y-अक्ष) और क्षैतिज अक्ष 'Quantity Demanded' (X-अक्ष) को दर्शाता है। कीमत में 50% बदलाव से मांग की गई मात्रा में 10% बदलाव आता है, जो यह दर्शाता है कि \( Ed < 1 \), जिससे सापेक्ष बेलोचदार मांग प्रदर्शित होती है।
5. Example: foodgrains.
In simple words: Relatively elastic demand shows a large change in quantity demanded for a small price change (flatter curve), whereas relatively inelastic demand shows a small change in quantity demanded for a large price change (steeper curve).

🎯 Exam Tip: Clearly define the percentage change in quantity vs. price, state the elasticity coefficient (e > 1 or e < 1), and describe the slope of the demand curve for both types. Provide relevant examples.

 

Question 2. Perfectly elastic demand and Perfectly inelastic demand.
Answer:
Perfectly elastic demand :
1. When a small change in price brings an infinite change in quantity demanded, then demand is said to be Perfectly Elastic demand.
2. The numerical value of Perfectly Elastic demand is infinite i.e. \( e = \infty \)
3. The demand curve is horizontal straight line parallel to X-axis.
4. Such a demand is a myth or theoretical.
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक क्षैतिज मांग वक्र (DD) को दर्शाता है जो X-अक्ष के समानांतर एक विशिष्ट मूल्य स्तर (EP) पर है। ऊर्ध्वाधर अक्ष 'PRICE' (Y-अक्ष) और क्षैतिज अक्ष 'Quantity Demanded' (X-अक्ष) को दर्शाता है। यह दर्शाता है कि कीमत में एक छोटे से बदलाव से मांग की गई मात्रा में अनंत बदलाव आता है, जहाँ \( E = d (\text{infinity}) \), जो पूर्ण लोचदार मांग को दर्शाता है।

Perfectly inelastic demand.
1. When a change in price does not bring any change in quantity demanded, then demand is said to be Perfectly Inelastic demand.
2. The numerical value of Perfectly Inelastic demand is zero i.e. \( e = 0 \).
3. The demand curve is a vertical straight line parallel to Y-axis.
4. Such demand is found in case of life saving drugs, salt, etc.
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक ऊर्ध्वाधर मांग वक्र (DD) को दर्शाता है जो Y-अक्ष के समानांतर एक विशिष्ट मात्रा (Q) पर है। ऊर्ध्वाधर अक्ष 'PRICE' (Y-अक्ष) और क्षैतिज अक्ष 'Quantity Demanded' (X-अक्ष) को दर्शाता है। यह दर्शाता है कि कीमत में बदलाव से मांग की गई मात्रा में कोई बदलाव नहीं आता है, जहाँ \( E = 0 \), जो पूर्ण बेलोचदार मांग को दर्शाता है।
In simple words: Perfectly elastic demand means an infinite change in quantity demanded for a tiny price change (horizontal curve), while perfectly inelastic demand means no change in quantity demanded regardless of price change (vertical curve).

🎯 Exam Tip: These are extreme cases of elasticity. Highlight the behavior of quantity demanded with respect to price, the numerical elasticity value, and the shape of the demand curve for a complete answer.

6. Answer The Following Questions:

 

Question 1. Explain the factors influencing elasticity of demand.
Answer:
The concept of Price Elasticity was developed by great neo-classical economist Dr. Alfred Marshall in the year 1890.
According to Dr. Alfred Marshall, “The elasticity or responsiveness of demand in a market is great or small, according to the amount demanded which increases much or little for a given fall in price, and diminishes much or little for a given rise in price. "
Elasticity of demand in fact refers to the degree of responsiveness of the quantity demanded of a commodity to change in the variable on which demand depends.
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक माइंड मैप या फ्लोचार्ट आरेख है जिसका शीर्षक "FACTORS INFLUENCING ELASTICITY OF DEMAND" है। यह विभिन्न कारकों जैसे (a) वस्तु की प्रकृति, (b) विकल्प की उपलब्धता, (c) वस्तु की स्थायित्व, (d) वस्तु के उपयोग, (e) कीमत की सीमा, (f) उपभोक्ता की आय, (g) आदतों और रीति-रिवाजों का प्रभाव, (h) समय अवधि, (i) आय खर्च का अनुपात, (j) तात्कालिकता और स्थगन, और (k) पूरक वस्तुएं में शाखाओं में बंटा हुआ है।
• Nature of Commodity : By nature, commodities are classified as necessaries comforts and luxuries. Normally demand for necessaries like food grains are relatively inelastic and for comforts and luxuries like diamond, perfumes, etc is relatively elastic.
• Availability of Substitutes : The larger the number of substitutes available for a commodity, the greater would be the elasticity. Demand for products like soap, soft drinks, detergents, tooth paste, etc. have many substitute so demand is elastic, However, salt, garlic, onions have no substitute so demand is inelastic.
• Durability of the Commodity : The demand for durable goods like T.V., car, fridge, etc is relatively inelastic in the short run and elastic in the long run. Whereas the demand for perishable goods is relatively inelastic.
• Uses of Commodity : Single use commodities have less elastic demand and multi-use goods like coal, electricity, sugar, etc. have relatively elastic demand.
• Range of Price : The demand for commodities which are highly priced and will have a inelastic demand like AC, car, etc. Even very low priced goods have inelastic demand.
• Consumer's Income : Generally if income is very high, the demand for over allcommodities tends to be relatively inelastic. The demand pattern of the rich people is rarely affected even when there is significant price change.
• Influence of Habits and Customs : When a person is habituated to consume a certain commodity, the demand will be inelastic for that commodity. E.g. demand for cigarettes to a chain smoker is inelastic.
• Time Period : The demand for goods is less elastic in the short period and more elastic in the long period. This is because (1) consumer are better informed about their price (2) habits of consumer's change in the long run (3) durable goods get worn out in the long period.
• Proportion of Income Spend : If consumer spends a very small proportion of his income on a commodity, the demand for it will be relatively inelastic & vice-versa. For e.g. demand for salt, newspaper, pins are inelastic.
• Urgency and Postponement : If the demand for a commodity is urgent then demand for it will be inelastic. E.g. demand for medicine for a patient. Whereas, if the demand for a commodity can be postponed it will have elastic demand.
• Complementary Goods : Complementary goods are those goods which are demanded jointly such as car and petrol, mobile and sim cards, etc. Demand for petrol will be inelastic as car cannot run without petrol.
In simple words: Elasticity of demand is influenced by various factors, including the necessity of the good, availability of substitutes, durability, number of uses, price level, consumer income, habits, the time period considered, proportion of income spent, and whether consumption can be postponed or if it's a complementary good.

🎯 Exam Tip: When explaining factors, use clear headings for each point and provide a brief explanation along with an example to illustrate how each factor affects demand elasticity.

 

Question 2. Explain the total outlay method of measuring elasticity of demand?
Answer:
Total Outlay Method : This method was introduced by Dr. Alfred Marshall. The limitation of this method is that in this method unlike ratio method, the exact numerical value of the elasticity of demand cannot be determined. According, to this method, the elasticity of demand is measured on the basis of expenditure incurred by consumer when the price of a commodity changes.
Total outlay or total expenditure can be calculated by multiplying the price with the quantity demanded (Price x Quantity demand = Total Expenditure). Depending upon the kind of change in total outlay, whether it increases, or decreases, or remain constant with the change in price we will be able to decide the type of elasticity. This can be explained with the following example:-

Price Per Unit	Quantity demanded	Total Outlay Rs.	Elasticity of demand
10	100 units	10 × 100 = 1000	Unitary Elastic \( e=1 \)
5	200 "	5 × 200 = 1000
10	100 "	10 × 100 = 1000	Relatively Elastic \( e > 1 \)
8	150 "	8 × 150 = 1200
10	100 "	10 × 100 = 1000	Relatively Inelastic \( e < 1 \)
6	150 "	6 × 150 = 900

1. If the total outlay remains the same with a rise or fall in price then the demand is said to be unitary (\( e = 1 \)) elastic.
2. If the total outlay decreases with a rise in price and increases with a fall in price, the elasticity of demand is greater than one or Relatively Elastic \( e > 1 \).
3. If the total outlay increases with a rise in price and decreases with a fall in price, then elasticity is less than one or relatively inelastic, \( e < 1 \).
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक रैखिक मांग वक्र (AB) को दर्शाता है जो नीचे की ओर ढलान वाला है। यह दर्शाता है कि वक्र के विभिन्न खंड अलग-अलग लोच को कैसे दर्शाते हैं: ऊपरी खंड (उदाहरण के लिए, P से ऊपर, 4 सेमी) अधिक लोचदार है, जबकि निचला खंड (उदाहरण के लिए, P से नीचे, 6 सेमी) कम लोचदार है। यह एक रैखिक मांग वक्र पर बिंदु लोच की अवधारणा को दृश्य रूप से प्रस्तुत करता है।
In simple words: The Total Outlay Method determines demand elasticity by observing how total consumer expenditure changes when the price of a good changes. If total outlay stays constant, demand is unitary elastic; if it moves inversely to price, demand is elastic; and if it moves in the same direction as price, demand is inelastic.

🎯 Exam Tip: When using the total outlay method, remember to calculate total expenditure (Price x Quantity) at different price levels. The relationship between price changes and total expenditure changes dictates the type of elasticity.

 

Question 3. Explain importance of elasticity of demand.
Answer:
ℹ️ चित्र व्याख्या (Diagram Explanation): यह एक माइंड मैप या फ्लोचार्ट आरेख है जिसका शीर्षक "FACTORS INFLUENCING ELASTICITY OF DEMAND" है। यह विभिन्न कारकों जैसे (a) वस्तु की प्रकृति, (b) विकल्प की उपलब्धता, (c) वस्तु की स्थायित्व, (d) वस्तु के उपयोग, (e) कीमत की सीमा, (f) उपभोक्ता की आय, (g) आदतों और रीति-रिवाजों का प्रभाव, (h) समय अवधि, (i) आय खर्च का अनुपात, (j) तात्कालिकता और स्थगन, और (k) पूरक वस्तुएं में शाखाओं में बंटा हुआ है।
• Nature of Commodity : By nature, commodities are classified as necessaries comforts and luxuries. Normally demand for necessaries like food grains are relatively inelastic and for comforts and luxuries like diamond, perfumes, etc is relatively elastic.
• Availability of Substitutes : The larger the number of substitutes available for a commodity, the greater would be the elasticity. Demand for products like soap, soft drinks, detergents, tooth paste, etc. have many substitute so demand is elastic, However, salt, garlic, onions have no substitute so demand is inelastic.
• Durability of the Commodity : The demand for durable goods like T.V., car, fridge, etc is relatively inelastic in the short run and elastic in the long run. Whereas the demand for perishable goods is relatively inelastic.
• Uses of Commodity : Single use commodities have less elastic demand and multi-use goods like coal, electricity, sugar, etc. have relatively elastic demand.
• Range of Price : The demand for commodities which are highly priced and will have a inelastic demand like AC, car, etc. Even very low priced goods have inelastic demand.
• Consumer's Income : Generally if income is very high, the demand for over allcommodities tends to be relatively inelastic. The demand pattern of the rich people is rarely affected even when there is significant price change.
• Influence of Habits and Customs : When a person is habituated to consume a certain commodity, the demand will be inelastic for that commodity. E.g. demand for cigarettes to a chain smoker is inelastic.
• Time Period : The demand for goods is less elastic in the short period and more elastic in the long period. This is because (1) consumer are better informed about their price (2) habits of consumer's change in the long run (3) durable goods get worn out in the long period.
• Proportion of Income Spend : If consumer spends a very small proportion of his income on a commodity, the demand for it will be relatively inelastic & vice-versa. For e.g. demand for salt, newspaper, pins are inelastic.
• Urgency and Postponement : If the demand for a commodity is urgent then demand for it will be inelastic. E.g. demand for medicine for a patient. Whereas, if the demand for a commodity can be postponed it will have elastic demand.
• Complementary Goods : Complementary goods are those goods which are demanded jointly such as car and petrol, mobile and sim cards, etc. Demand for petrol will be inelastic as car cannot run without petrol.
In simple words: Elasticity of demand is crucial for businesses in pricing strategies, government in taxation and policy making, and understanding market reactions to price changes for different goods.

🎯 Exam Tip: Explain the importance from multiple perspectives – producers (pricing decisions), government (taxation, subsidies, public utility pricing), and international trade (terms of trade). Use examples to strengthen each point.

7. Observe The Following Figure And Answer The Questions:

 

Question 1. Identify and define the degrees of elasticity of demand from the following demand curves.
Answer:
(a)
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक ऊर्ध्वाधर मांग वक्र (DD) को दर्शाता है जो मात्रा Q पर Y-अक्ष के समानांतर है। ऊर्ध्वाधर अक्ष PRICE (Y) और क्षैतिज अक्ष Quantity Demanded (X) को दर्शाता है। यह दर्शाता है कि कीमत में बदलाव के बावजूद मांग की गई मात्रा अपरिवर्तित रहती है, जो पूर्ण बेलोचदार मांग को इंगित करता है जहाँ \( E = 0 \)।
Concept: Perfectly Inelastic demand (\( Ed = 0 \)) Explanation : When change in price has no effect on the quantity demanded of that commodity, then it is called as perfectly inelastic demand. Demand curve 'DD' is a vertical straight line parallel to 'Y'-axis.

(b)
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक क्षैतिज मांग वक्र (DD) को दर्शाता है जो मूल्य EP पर X-अक्ष के समानांतर है। ऊर्ध्वाधर अक्ष PRICE (Y) और क्षैतिज अक्ष Quantity Demanded (X) को दर्शाता है। यह दर्शाता है कि एक विशिष्ट कीमत पर अनंत मात्रा की मांग की जाती है, जो पूर्ण लोचदार मांग को इंगित करता है जहाँ \( Ed = \infty \)।
Concept: Perfectly Elastic demand (\( Ed = \infty \)) (infinity) Explanation: When a change in price leads to infinite change in quantity demanded of a commodity then it is called as perfectly elastic demand. Demand curve is horizontal straight line (parallel to 'X'-axis.

(c)
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक मांग वक्र (DD) को दर्शाता है जहाँ मांग की गई मात्रा में प्रतिशत परिवर्तन कीमत में प्रतिशत परिवर्तन के ठीक बराबर होता है। इसके परिणामस्वरूप एक आयताकार अतिपरवलय बनता है, जो एकात्मक लोचदार मांग को दर्शाता है।
Concept: \( Ed = 1 \) Unitary elastic demand Explanation : When proportionate or percentage change in quantity demanded is exactly equal to proportionate or percentage change in price, then it is called as Unitary Elastic demand. Demand curve is called as rectangular hyperbola.

(d)
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख एक अपेक्षाकृत सपाट मांग वक्र (DD) को दर्शाता है जहाँ मांग की गई मात्रा में प्रतिशत परिवर्तन कीमत में प्रतिशत परिवर्तन से अधिक होता है। यह अपेक्षाकृत लोचदार मांग को इंगित करता है, जहाँ \( Ed > 1 \)।
Concept: Relatively Elastic Demand (\( Ed > 1 \)) Explanation: When proportionate or percentage change in quantity demanded is more than proportionate change it its price, then it is called as Relatively Elastic Demand. Demand curve is called as flatter curve.
In simple words: The four demand curves illustrate different degrees of elasticity: vertical for perfectly inelastic (\( Ed = 0 \)), horizontal for perfectly elastic (\( Ed = \infty \)), a rectangular hyperbola for unitary elastic (\( Ed = 1 \)), and a flatter slope for relatively elastic (\( Ed > 1 \)).

🎯 Exam Tip: Practice drawing and labeling each type of demand curve accurately. Clearly define the elasticity concept for each curve, its numerical value, and the corresponding shape of the demand curve.

 

Question 2. In the following diagram AE is the linear demand curve of a commodity. On the basis of the given diagram state whether the following statements are True or False. Give reasons to your answer.
ℹ️ चित्र व्याख्या (Diagram Explanation): यह आरेख A से E तक नीचे की ओर ढलान वाला एक रैखिक मांग वक्र (AE) दर्शाता है। इस वक्र पर बिंदु B, D और C अंकित हैं। Y-अक्ष 'Price' और X-अक्ष 'Quantity Demanded' को दर्शाता है। इस वक्र का उपयोग विभिन्न बिंदुओं पर विभिन्न लोच को दर्शाने के लिए किया जाता है।
1) Demand at point 'C' is relatively elastic demand.
2) Demand at point 'B' is unitaiy elastic demand.
3) Demand at point 'D' is perfectly inelastic demand.
4) Demand at point 'A' is perfectly elastic demand.
Answer:
1.
True. Reason: Demand at point 'C' is relatively elastic demand.
2.
False. Reason: It is relatively inelastic demand.
3.
False. Reason: It is relatively elastic demand.
4.
False. Reason: It is unitary elastic demand.
5. True, it is perfectly elastic \( Ed = \infty \)
In simple words: This exercise evaluates the elasticity at different points on a linear demand curve, where elasticity varies along its length, from perfectly elastic at the price axis to perfectly inelastic at the quantity axis.

🎯 Exam Tip: For a linear demand curve, elasticity is not constant. Remember that points higher up the curve (closer to the price axis) are more elastic, while points lower down (closer to the quantity axis) are less elastic, with unitary elasticity typically at the midpoint.