CIMA BA1 · Chapter 6 · Question 10 of 10
If a demand curve has a price elasticity of exactly 1 (unitary elasticity) at every point, then:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) Total revenue remains the same whatever price is charged
Explanation
With unitary elasticity, a given percentage change in price causes an equal and opposite percentage change in quantity, so price x quantity is constant. Such a curve is a rectangular hyperbola. A horizontal line is perfectly elastic and an unchanging quantity is perfectly inelastic.
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