Q.When the price of a good falls from ₹10 to ₹8 per unit, the quantity demanded rises from 40 units to 55 units. Calculate the price elasticity of demand by the percentage method and state its type.

Necessaries must be consumed regardless of price, so their quantity demanded changes very little with price — their demand is inelastic. Answer: (b) Inelastic.

Price elasticity of demand measures the responsiveness of quantity demanded to a change in price. Demand is elastic when a small price change causes a large change in quantity, and inelastic when even a large price change causes only a small change in quantity.

Necessaries — such as salt, basic foodgrains, or essential medicines — are goods a household cannot easily do without. People go on buying almost the same amount even if the price rises, and they do not buy much more if the price falls, because the need is fixed. As a result the quantity demanded is relatively unresponsive to price, i.e. demand is inelastic (elasticity less than one). This is why options (a) elastic, (c) unitary elastic and (d) perfectly elastic are incorrect.

This is a standard elasticity application from the Demand Analysis unit of the CHSE Odisha +2 Commerce Business Economics syllabus, which draws on the NCERT/CBSE commerce curriculum.

The statement is incorrect; a unitary elastic demand curve is a rectangular hyperbola, not vertical. Correct statement: 'The shape of unitary elastic demand curve is a rectangular hyperbola.'

The shape of a demand curve reflects its price elasticity:

• Unitary elastic demand (elasticity exactly equal to one) means a given percentage change in price causes an equal percentage change in quantity demanded, so total expenditure stays constant at every price. A curve that keeps price times quantity constant everywhere is a rectangular hyperbola.
• A vertical demand curve represents perfectly inelastic demand (elasticity = 0) — quantity demanded does not change at all when price changes.
• A horizontal demand curve represents perfectly elastic demand (elasticity = infinity).

The statement wrongly assigns the vertical shape to unitary elasticity. Keeping the underlined phrase 'unitary elastic demand curve', the description 'vertical' must be corrected to 'rectangular hyperbola'.

The correct answer is (c) Horizontal.

The shape of a demand curve reflects its price elasticity — a key topic in CHSE Odisha +2 Business Economics (aligned with the NCERT/CBSE curriculum).

• Downward sloping (a) is the shape of a normal demand curve with finite elasticity, not the perfectly elastic case.
• Vertical (b) represents perfectly inelastic demand (elasticity = 0), where quantity does not change with price.
• Horizontal (c) represents perfectly elastic demand (elasticity = infinity): at the ruling price consumers buy any amount, but a tiny rise in price reduces demand to zero.
• Rectangular hyperbola (d) represents unitary elastic demand (elasticity = 1), where total expenditure stays constant.

Hence a perfectly elastic demand curve is horizontal.