If a good has an absolute price elasticity of 1, the demand for the good is
A) unit elastic.
B) inelastic.
C) perfectly elastic.
D) elastic.

Question

Quizplus · Accepted Answer

An absolute price elasticity of 1 means that the percentage change in quantity demanded is equal to the percentage change in price. This is the definition of unit elasticity, where a change in price has an equal and opposite effect on quantity demanded, resulting in a constant total revenue. Therefore, the demand for the good is unit elastic.

If a Good Has an Absolute Price Elasticity of 1