Unitary Elastic Demand

Unitary elastic demand is found in a situation when a given change in price produces an equal proportionate change in quantity demanded. In this case change in produces an equal proportionate change in quantity demanded. In this case change in price is exactly equal to the change in quantity demanded and the price elasticity is price is exactly equal to the change in quantity demanded and the price elasticity is price is equal to 1. For instance if price of a commodity falls by 20% the quantity demanded will rise exactly by 20%. This is illustrated below.

In Fig.12, fall in price is P₁P₂   and rise in quantity demanded is Q₁Q₂. Since P₁P₂  = Q₁Q_2, the elasticity of demand is equal to 1. In this case the demand curve becomes a rectangular hyperbola.