If a good's price elasticity of demand is exactly 1, total revenue remains constant when price changes.

• A. True
• B. False
• C. Only for certain goods.
• D. Depends on supply.

Answer: (A)

When demand is unit elastic, the percentage change in quantity demanded exactly offsets the percentage change in price. Since total revenue is price times quantity (R = P × Q), this offset means revenue stays the same when price changes. If the elasticity is exactly 1 in magnitude across the price range, the relationship Q = k/P holds, so R = P × (k/P) = k, a constant. A quick check using the elasticity formula also shows dR/dP = 0 when e = -1, confirming no revenue change for price movements. So the statement is true.