Which statement defines unit elastic demand?

Which statement defines unit elastic demand?

• A. The percentage change in quantity demanded equals the percentage change in price.
• B. Demand is perfectly inelastic.
• C. Total revenue rises when price falls.
• D. The demand curve is vertical.

Answer: (A)

Unit elastic demand occurs when the percentage change in quantity demanded equals the percentage change in price, so the price elasticity of demand is 1. This means a given percent change in price causes the same percent change in quantity demanded, and total revenue stays essentially unchanged for small price changes because the lower price is exactly offset by higher quantity (and vice versa). For example, a 10% drop in price leads to a 10% increase in quantity demanded, leaving revenue roughly the same. The other statements describe different cases: perfectly inelastic demand means quantity doesn’t respond to price (elasticity = 0, a vertical demand curve); total revenue rising when price falls describes elastic demand (elasticity > 1); and a vertical demand curve itself is not unit elastic.

Unit elastic demand occurs when the percentage change in quantity demanded equals the percentage change in price, so the price elasticity of demand is 1. This means a given percent change in price causes the same percent change in quantity demanded, and total revenue stays essentially unchanged for small price changes because the lower price is exactly offset by higher quantity (and vice versa). For example, a 10% drop in price leads to a 10% increase in quantity demanded, leaving revenue roughly the same. The other statements describe different cases: perfectly inelastic demand means quantity doesn’t respond to price (elasticity = 0, a vertical demand curve); total revenue rising when price falls describes elastic demand (elasticity > 1); and a vertical demand curve itself is not unit elastic.