Question

Identify and explain the following concepts:

40% fall in price of a commodity leads to 40% rise in quantity demanded.

Answer 1

Unitary Elastic Demand

Explanation:

When a 40% fall in price leads to a 40% rise in quantity demanded, it is called Unitary Elastic Demand.

In this case, the percentage change in quantity demanded equals the percentage change in price. Therefore, the price elasticity of demand (Ed) = 1.