Question

Unitary elastic demand means ________________.

• A. $E_d=0$
• B. $E_d<1$
• C. $E_d=1$
• D. $E_d=\infty$

Answer 1

Answer: (C)

$E_d=1$

$\Rightarrow$ The price elasticity of demand is the percentage change in the quantity demanded of a good or service divided by the percentage change in the price.

$\Rightarrow$ $E_d=\frac{\%changeinquantity}{\%changeinprice}$

$\Rightarrow$ A unitary elasticity means that a given percentage change in price leads to an equal percentage change in quantity demanded or supplied.

So, in unitary elastic demand,

$\%$ Change in quantity $=\%$ Change in price.

$\therefore$ $E_d=1$

$\therefore$ Unitary elastic demand means $E_d=1$