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unit elasticity


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The case where a proportional change in one variable causes an equal proportional change in another. In the case of a unit price elasticity of demand, a proportional rise in price produces an equal proportional fall in quantity demanded: total revenue is thus constant, and marginal revenue is zero. In the case of the income elasticity of demand, unit elasticity means that at any given price the proportion of income spent on a good remains constant as income changes.

Subjects: Economics.


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