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Question
Indicate the degree of elasticity of demand of the following demand curve.
Solution
Ed > 1
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| Column I | Column II | ||
| (i) | Perfectly elastic demand | A. | Ed = 0 |
| (ii) | Perfectly inelastic demand | B. | Ed = ∞ |
| (iii) | Relatively elastic demand | C. | Ed < 1 |
| (iv) | Relatively inelastic demand | D. | Ed > 1 |
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| Column I | Column II |
| A. Goods whose close substitutes are available | (i) Perfectly elastic demand |
| B. Goods whose demand cannot be postponed | (ii) Perfectly inelastic demand |
| C. Goods whose quantity demanded does not respond to price change | (iii) Elastic demand |
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