Enhetselastic

Enhetselastic refers to a concept in economics related to price elasticity of demand. Specifically, it describes a situation where a one percent change in the price of a good or service leads to exactly a one percent change in the quantity demanded. This results in total revenue remaining constant regardless of price fluctuations.

When demand is unit elastic, the percentage change in quantity demanded is equal in magnitude but opposite in direction to the percentage change in price. For example, if the price of a product increases by 10%, the quantity demanded will decrease by exactly 10%. If the price decreases by 5%, the quantity demanded will increase by exactly 5%. This precise relationship is what defines unit elasticity.

Economically, understanding unit elasticity is important for businesses when making pricing decisions. If a company believes its product has unit elastic demand, it would realize that changing the price would not alter its total revenue. This implies that any price increase would be offset by an equal percentage decrease in sales volume, and vice versa. In reality, perfectly unit elastic demand is rare and often applies to specific price ranges or certain types of goods. Most goods exhibit elastic or inelastic demand over different price points.