Question : If demand is unitary elastic, a 25% price increase will produce:
Option 1: 25% increase in overall revenue.
Option 2: There has been no change in the quantity demanded.
Option 3: 1% reduction in quantity demanded
Option 4: 25% reduction in quantity demanded
Answer (1)
26th Jan, 2024
Correct Answer: 25% reduction in quantity demanded
Solution :
When the number equals one, the elasticity of demand is unitary. In other words, quantity and price change at the same rate.
If demand is unitary elastic, a 25% increases in price will result in a 25% reduction in the quantity demanded.
Hence d is the correct answer.
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