Question
When does a demand curve take the shape of a rectangular hyperbola?
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Answer
If the equation of a demand curve takes the form pq = e, where e is constant, irrespective of the values of p and q, then the demand curve that we get is a rectangular hyper- bola, implying that on each and every point on the curve, the area underlying is the same. In the graph depicted above, point Q on the demand curve corresponds to area enclosed by rectangle OPOR which is 12 units [OP × OR = 4 × 3] Also, point T on the demand curve corresponds to area enclosed by rectangle OSTU which is again 12 units (OS× OU = 3 × 4). Therefore, demand curve DD is a rectangular hyperbola.
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