Question

The equation of demand curve is \( p \dot q = e \) \(\text{ where } p \text{ is price, } q \text{ is quantity, and }\) e \(\text{ is constant}\). What would be the shape of this demand curve?
 

• A. Downward sloping curve
• B. Rectangular hyperbola
• C. Straight line
• D. Vertical line

Hint:

The equation \( p \cdot q = e \) represents a rectangular hyperbola, which shows an inverse relationship between price and quantity.

Answer 1

The Correct Option is B

Step 1: Equation of the demand curve.
The equation of the demand curve is given as \( p \cdot q = e \), where \( p \) is the price, \( q \) is the quantity, and \( e \) is constant. This equation represents a hyperbolic curve.

Step 2: Analyzing the options.
(A) Downward sloping curve: This is incorrect because a downward sloping curve would typically represent a linear relationship between price and quantity, which is not the case here.
(B) Rectangular hyperbola: Correct. The equation \( p \cdot q = e \) represents a rectangular hyperbola, which is the graphical representation of the relationship between price and quantity.
(C) Straight line: This is incorrect, as the equation does not describe a linear relationship between price and quantity.
(D) Vertical line: This is incorrect because a vertical line would imply that price does not change with quantity, which is not the case here.

Step 3: Conclusion.
The correct answer is (B) Rectangular hyperbola, as the equation \( p \cdot q = e \) forms a rectangular hyperbolic curve.