If the price elasticity of demand for a product is exactly one, a percentage change in price causes quantity demanded to change by:
Correct answer: B. An equal percentage in the opposite direction
- A. A smaller percentage in the opposite direction
- B. An equal percentage in the opposite direction
- C. An equal percentage in the same direction
- D. No percentage change in either direction
Explanation
Unitary price elasticity means the absolute percentage change in quantity demanded equals the percentage change in price. The two changes move in opposite directions because of the usual inverse price-demand relationship.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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