The demand curve is elastic when _______ and it is inelastic when __________.

The correct answer is marginal revenue has a positive value; marginal revenue has a negative value.

Key Points

• The demand curve is a concept in economics that plots the price of a product or service against how much of the product or service people buy.
• Typically, the lower the price of an item, the more people buy.
• However, that relationship varies depending on the item.
• An elastic demand curve means that a change in price has a large effect on buying, while an inelastic demand curve means that a price change has less effect on buying.

Additional Information

• Marginal revenue is related to the price elasticity of demand — the responsiveness of quantity demanded to a change in price.
• When marginal revenue is positive, demand is elastic; and when marginal revenue is negative, demand is inelastic.
• On a graph with both a demand curve and a marginal revenue curve, demand will be elastic at all quantities where marginal revenue is positive.
• Demand is unit elastic at the quantity where marginal revenue is zero.                 
• If the elasticity of demand is less than zero then it denotes that the change in quantity demand is opposite to the change in its own price.
• It means that the slope of the demand curve is negative at this point and the marginal revenue is also negative due to negative slope.