Question

When percentage change in quantity demanded is equal to percentage change in price, then demand for such a commodity is said to be ______

Options

• Perfectly Elastic

• Relatively Elastic

• Unitary Elastic

• None of the above

Answer 1

When percentage change in quantity demanded is equal to percentage change in price, then demand for such a commodity is said to be Unitary Elastic.

Explanation:

1. Perfectly Elastic Demand (Ed = ∞): Demand for a commodity is said to be completely elastic when the percentage change in quantity demanded is infinite with a minor increase in price. In this case, the demand curve is parallel to the X-axis.
2. Unitary Elastic Demand (Ed = 1): Demand for a commodity is said to be unitary elastic when the percentage change in quantity demanded equals the percentage change in price. The demand curve is shaped like a rectangular hyperbola, with unity elasticity at all points.
3. Relatively Elastic Demand (Ed > 1): Demand is considered to be extremely elastic when a percentage change in the price of a commodity induces a higher percentage change in the amount desired.