Question

At the point where the straight-line demand curve cuts the x-axis, what is the value of elasticity of demand?

• A. \( |e_d| = 0 \)
• B. \( |e_d| = 1 \)
• C. \( |e_d| = \infty \)
• D. \( |e_d|<1 \)

Hint:

At the point where a straight-line demand curve intersects the x-axis, the elasticity of demand is zero.

Answer 1

The Correct Option is A

Step 1: Understanding the point where the demand curve intersects the x-axis.
At the point where a straight-line demand curve intersects the x-axis, the quantity demanded becomes zero. At this point, the elasticity of demand is zero because any further price change will not affect the quantity demanded.

Step 2: Analysis of options.
(A) \( |e_d| = 0 \): Correct. At the point where the demand curve intersects the x-axis, the demand is perfectly inelastic, so the elasticity of demand is zero.
(B) \( |e_d| = 1 \): This would indicate unitary elasticity, but at the point of intersection with the x-axis, the elasticity is zero.
(C) \( |e_d| = \infty \): This would imply perfectly elastic demand, which is not the case at the intersection point.
(D) \( |e_d|<1 \): This suggests inelastic demand, but the demand at the point of intersection is perfectly inelastic.

Step 3: Conclusion.
The correct answer is (A) \( |e_d| = 0 \), as the demand at the point where the demand curve intersects the x-axis is perfectly inelastic.