Short Answer

Unitary elasticity means a situation where the percentage change in quantity demanded or supplied is exactly equal to the percentage change in price. In this case, the elasticity value is equal to 1.

This means that any change in price leads to a proportionate change in demand or supply. As a result, total revenue remains the same even when the price changes.

Detailed Explanation:

Meaning of Unitary Elasticity

Definition

Unitary elasticity is a condition in which the responsiveness of demand or supply to a change in price is perfectly balanced. This means that the percentage change in quantity demanded or supplied is equal to the percentage change in price.

When elasticity is equal to 1, it is called unitary elastic. In this situation, the increase or decrease in price does not affect the total revenue of the seller.

Example

Suppose the price of a product increases by 10% and the quantity demanded decreases by 10%. This is a case of unitary elasticity. Here, the loss in quantity demanded is exactly balanced by the increase in price.

Similarly, if price decreases by 5% and demand increases by 5%, the total revenue remains unchanged. This shows that the effect of price change is neutral.

Features of Unitary Elasticity

Equal Change in Price and Quantity

In unitary elasticity, the percentage change in price and quantity is the same. This is the main feature that defines this concept.

No Change in Total Revenue

One important feature is that total revenue remains constant. Even if price increases or decreases, total income from sales does not change.

Balanced Consumer Response

Consumers respond to price changes in a balanced way. They neither overreact nor ignore the change. Their behavior is moderate and predictable.

Midpoint of Demand Curve

Unitary elasticity is usually found at the middle portion of a demand curve. At this point, the effect of price change on total revenue is neutral.

Practical Importance

Although it is not very common in real life, it is important for theoretical understanding. It helps in comparing elastic and inelastic demand.

Conclusion

Unitary elasticity is a special case where the percentage change in price and quantity is equal. It results in no change in total revenue. This concept helps in understanding how demand behaves in a balanced situation and is useful in economic analysis.