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    Question

    When price elasticity of demand is unity, the total

    expenditure:
    A increases with rise in price Correct Answer Incorrect Answer
    B decreases with fall in price Correct Answer Incorrect Answer
    C increases with fall in price Correct Answer Incorrect Answer
    D has no effect of price change Correct Answer Incorrect Answer

    Solution

    In simple terms, if a commodity has unitary elastic demand, then no matter if the price increases or decreases, the total expenditure made on it remains unchanged. In the above example, the price elasticity of demand is equal to one because the total expenditure remains the same no matter if the price falls or rises.

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