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Question
Define or explain the following concept.
Unitary elastic demand.
Solution
Unitary elastic demand implies that a change in the price of a commodity leads to a proportionate change in the quantity demanded of that commodity. For instance, if the demand for Good X is unitary elastic, a 50% increase in the price of Good X will lead to a 50% decline in the quantity demanded of Good X. In this case, Ed = 1.
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| 4. Increase or decrease in demand for a commodity does not cause any change in its price. | (d) Effect on supply, in the case of Perfectly Elastic Demand. |
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