If the price elasticity of demand is 1 in absolute value, then a percentage drop in price will lead to an equal percentage increase in quantity demanded.

Question

Quizplus · Accepted Answer

This statement accurately reflects the definition of price elasticity of demand. If the price elasticity of demand is 1 in absolute value (i.e. unitary elastic), then a percentage change in price will result in an equal percentage change in quantity demanded in the opposite direction. So, a price drop of 10% would lead to a quantity demanded increase of 10% if the elasticity is 1.

If the Price Elasticity of Demand Is 1 in Absolute