Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market.
-If the demand for a product is unit-elastic, a 25 percent increase in its price will result in:
A)a 25 percent change in total revenue.
B)no change in quantity demanded.
C)a 1 percent increase in quantity demanded.
D)a 25 percent decrease in quantity demanded.
E)a 100 percent change in quantity demanded.

Question

​Figure 5.3. The figure shows the wage rate and the quantity of labor supplied in an unskilled labor market. 
-If the demand for a product is unit-elastic, a 25 percent increase in its price will result in:
A)a 25 percent change in total revenue. 
B)no change in quantity demanded. 
C)a 1 percent increase in quantity demanded. 
D)a 25 percent decrease in quantity demanded. 
E)a 100 percent change in quantity demanded.

Quizplus · Accepted Answer

If the demand for a product is unit-elastic, a 25 percent increase in its price will result in a 25 percent decrease in quantity demanded. This is because the percentage change in quantity demanded will be equal to the percentage change in price, resulting in a constant elasticity of demand. Therefore, choice D is the best answer.

​Figure 53

Figure 53