What defines unit elastic demand?

What defines unit elastic demand?

• A. Price and quantity move in opposite directions by equal percentages.
• B. Price and quantity move in the same direction by equal percentages.
• C. Price changes do not affect quantity demanded.
• D. Quantity demanded changes by a fixed amount regardless of price.

Answer: (A)

Unit elastic demand means the quantity demanded changes by the same percentage as price changes, but in the opposite direction. In elasticity terms, the price elasticity of demand equals ±1, so %ΔQd = -%ΔP. For example, a 5% rise in price leads to a 5% fall in quantity demanded, and a 10% price drop leads to a 10% rise in quantity demanded. This proportional response is why total revenue stays roughly the same for small price changes. The other descriptions don’t fit because they imply either no response to price, a response in the same direction, or a fixed absolute change in quantity rather than a proportional percentage change.

Unit elastic demand means the quantity demanded changes by the same percentage as price changes, but in the opposite direction. In elasticity terms, the price elasticity of demand equals ±1, so %ΔQd = -%ΔP. For example, a 5% rise in price leads to a 5% fall in quantity demanded, and a 10% price drop leads to a 10% rise in quantity demanded. This proportional response is why total revenue stays roughly the same for small price changes. The other descriptions don’t fit because they imply either no response to price, a response in the same direction, or a fixed absolute change in quantity rather than a proportional percentage change.