Microeconomics: Unitary elasticity properties

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SUMMARY

The discussion centers on the concept of unit elasticity in microeconomics, specifically regarding the demand for good A. It is established that unit elastic demand implies a proportional change in price and quantity demanded, leading to no change in total revenue. The correct answer to the posed question is D, indicating that a 5 percent increase in price will have no impact on the consumer's spending on the good. This conclusion is drawn from the understanding that unit elasticity maintains total revenue constant despite price fluctuations.

PREREQUISITES
  • Understanding of unit elasticity in microeconomics
  • Familiarity with total revenue calculations (TR = P x Q)
  • Basic knowledge of demand curves and their properties
  • Concept of price elasticity of demand
NEXT STEPS
  • Research the implications of unit elasticity on consumer behavior
  • Study the differences between elastic, inelastic, and unit elastic demand
  • Explore real-world examples of unit elasticity in various markets
  • Learn how to calculate price elasticity of demand using specific formulas
USEFUL FOR

Students of economics, educators teaching microeconomics, and anyone interested in understanding consumer behavior and market dynamics related to elasticity.

maiad
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Homework Statement


The demand for good A is unit elastic. This means that a 5 percent increase in price will ______
A) result in an infinite increase in the quantity of A demanded.
B) result in a 1 percent decrease in the quantity of A demanded.
C) result in 5 percent increase in quantity demanded.
D) have no impact on the consumer's spending on the good.
E) increase consumer's spending on the good by 5 percent.


Homework Equations





The Attempt at a Solution


I'm sure A to C is false which only leaves the answer to be D or E.
I know unitary elasticity has a proportional change in terms of % change in price and % change in quantity demanded. Assuming consumerspending= P x Q, TR will remain relatively the same. So would it be D?
 
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I know nothing about economics (OK I have just heard of more and less elastic demand) but find it obvious how you would define a thing like this, would be surprised if I was wrong. Maybe if you looked the definition in your textbook? - I don't suppose they are after guesses here.
 

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