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Question
State whether the following statement is TRUE and FALSE.
Unitary Elastic Demand rarely occurs in practice.
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Solution
TRUE
Unitary elasticity implies that a certain percentage increase in price is offset by equal percentage decrease in demand. If price of a good rises by two times, then the demand for the good gets halved. Similarly, a percentage decrease in price is offset by an equal percentage increase in demand for the good. Such an exact behaviour rarely occurs in practice.
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