Unitary elastic demand refers to a type of demand in which the percentage change in demand is exactly equal to the percentage change in price. This means that as the price of a good or service increases, the quantity demanded decreases by the same percentage, and vice versa. It is also known as unit elastic demand because the rate of decrease in demand is equal to the rate of rise in prices. In other words, the proportion of change in demand for goods and services is equal to the proportion of change in its price.
For example, if the price of a juicer is $20 and 50 units are sold per day, and then the price increases to $28, the manufacturers notice that the demand falls to 30 units. This illustrates unitary elastic demand, as the quantity demanded decreases in the same proportion as the price increase.
Unitary elastic demand is represented by an elasticity coefficient of 1. This means that the demand curve is perfectly responsive to price changes, and the percentage change in quantity demanded is exactly the same as the percentage change in price.
In summary, unitary elastic demand is a concept in economics that describes a situation where the quantity demanded changes by the same percentage as the price changes. It is an important concept for understanding the responsiveness of demand to price fluctuations.
