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Microeconomics: Unitary elasticity properties

  1. Mar 1, 2014 #1
    1. The problem statement, all variables and given/known data
    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.


    2. Relevant equations



    3. 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?
     
    Last edited: Mar 1, 2014
  2. jcsd
  3. Mar 1, 2014 #2

    epenguin

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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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