Unitary Elastic Demand

In case of unitary elastic demand, the proportion of change in demand for goods and services is equal to proportion of change in its price. which means the change in the ratio of the price of the goods and services is equal to the change in demand of the goods and services.

Observe the graph below, price of the goods increased from P1 to P2 in certain proportion then the demand for the goods decreases from Q1 to Q2 in same proportion to the price change. Therefore the proportionate change in price of goods and services is equal the proportionate change of demand for goods and services in case of the unitary elastic demand.

Unitary Elastic Demand Curve

For example, let us say, a 20% increase in price leads to a 20% fall in demand. Then

EP = 20 / 20 = 1

Example: The price of digital cameras increases by 10%, the quantity of digital cameras demanded decreases by 10%. The price elasticity of demand is (unitary elastic demand).