Question

The following graph displays four demand curves (LL, MM, NN, and 00) that intersect at point A. 

Using the graph, complete the table that follows by indicating whether each statement is true or false. 

Statement True False 

Curve NN is more elastic between points A and D than curve MM is between points A and C. 

Between points A and E, curve 00 is perfectly elastic. 

Between points A and D, curve NN is inelastic

Answer 1

Since the curve NN is steeper than the curve MM, the curve NN is relatively more inelastic. This is because demand is less responsive to changes in price. So, this statement is false.

If a curve is perfectly elastic then the consumer will purchase different quantities at the same price and if the curve is perfectly inelastic then the consumer will purchase same quantity irrespective of the price. This is denoted by a vertical line. So, the curve OO is perfectly inelastic. Therefore, this statement is false.

Since the curve NN is steeper than the 45 degree line which represents unitary elastic demand, the curve NN is inelastic because the percentage change in quantity demanded will be less than the percentage change in price. So, this statement is true.