Q.2 (A) (ii) Identify and explain the concept : Rise in price by 20% of a commodity 'X' leads to fall in the demand of the same commodity 'X' by 20%.
Best answer
Answer: Unitary elastic demand (\(E_d = 1\))
Explanation: When the percentage change in quantity demanded is equal to the percentage change in price, demand is unitary elastic. Here \(E_d = \dfrac{\%\ \text{change in demand}}{\%\ \text{change in price}} = \dfrac{20}{20} = 1\). The demand curve in this case is a rectangular hyperbola, and total expenditure on the good remains the same when price changes.
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