Unit Elastic Demand:

The deman for a commodity is said to be unit elestic when the price elasticity of demand is exactly equal to one (1). The percentage change in price causes the same percentage change in quantity demanded.

Example

A rise in the price of a product from ¢136,000 to ¢153,000 resulted in quantity demanded decreasing from 80 to 70 units. Calculate the own price elasticity of demand and interpret your results.

Solution

ΔP = ¢153,000 - ¢136,000 = ¢17,000

ΔQ = 70 - 80 = - 10

PED = (ΔQ/ΔP) x (P/Q) = (-10/17,000) x (136,000/80) = -1.0

Since PED without the negative sign is equal to 1, demand for the product is unit elastic.