What does unitary elasticity refer to in economic terms?

Unitary elasticity is a specific concept in economics that describes a situation where a change in price leads to an equal percentage change in quantity demanded, resulting in unchanged total revenue. In this scenario, if prices increase, the quantity demanded decreases in such a way that the overall revenue (price multiplied by quantity) remains constant. This condition characterizes unitary elasticity because the responsiveness of demand to price changes is exactly balanced, meaning that the impact on revenue is neutral.

The other options present different concepts. The notion of perfect elasticity is more indicative of option B, where demand changes significantly with even the smallest price alteration. Option C fails to capture the nuance of unitary elasticity by suggesting a broad relationship rather than the specific one-to-one correspondence relevant in unitary elasticity. Lastly, option D implies a lack of sensitivity to price, which is not aligned with the characteristics of unitary elasticity, where consumers respond to price changes but in a way that leaves total revenue unaffected.