The demand for a product is unit elastic. At a price of $20, 10 units of a product are sold. If the price is increased to $40, what would one expect sales to equal?
A) 0 units
B) 5 units
C) 10 units
D) 20 units

Question

Quizplus · Accepted Answer

When demand is unit elastic, the percentage change in quantity demanded is equal to the percentage change in price. Doubling the price from $20 to $40 is a 100% increase, so the quantity sold will decrease by 50% from 10 units to 5 units to maintain unit elasticity.

The Demand for a Product Is Unit Elastic