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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.
Solution
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.
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