If the price elasticity of demand for a product is unity, a decrease in price will
A)have no effect upon the amount purchased.
B)increase the quantity demanded and increase total revenue.
C)increase the quantity demanded but decrease total revenue.
D)increase the quantity demanded, but total revenue will be unchanged.

Question

Quizplus · Accepted Answer

When the price elasticity of demand is equal to unity (1), it means that the percentage change in quantity demanded is equal to the percentage change in price. In this case, a decrease in price will lead to an increase in the quantity demanded, but the total revenue (price x quantity) will remain unchanged because the proportional increase in quantity demanded offsets the proportional decrease in price.

If the Price Elasticity of Demand for a Product Is