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If proportionate change in demand equals proportionate change in price, the demand is:
AUnitary elastic (Ep = 1) — rectangular hyperbola
BPerfectly elastic (Ep = ∞)
CPerfectly inelastic (Ep = 0)
DRelatively inelastic (Ep < 1)
Answer & Solution
Correct answer: A. Unitary elastic (Ep = 1) — rectangular hyperbola
1. When ΔQ% = ΔP%, the ratio Ep = 1.
2. This is termed unitary elastic demand.
3. The demand curve in this case is a rectangular hyperbola (TR stays constant).
_Source: ICMAI BoS CMA Foundation Paper 4 (Business Economics & Management), Module 1 §1.3 (Theory of Demand) + §Elasticity of Demand, p. 33-46_
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