Question

Would the elasticity of demand in the following case be unity, less than unity or greater than unity?

A fall in the price of commodity, the total expenditure remains the same.

Answer 1

If a fall in the price of a commodity leads to total expenditure remaining the same, the elasticity of demand would be unity (i.e., the demand is unitary elastic).

Unitary Elastic Demand (Ed = 1): When demand is unitary elastic, a percentage decrease in price leads to an equal percentage increase in quantity demanded, resulting in no change in total expenditure.