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A consumer buys 10 units of a good at a price of Rs.9 per unit. At price of Rs.10 per unit, he buys 9 units. What is price elasticity of demand? Use expenditure approach. Comment on the likely shape of demand curve based on this measure of elasticity. |
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Answer»
As per the expenditure approach, when with a change in price, the total expenditure remains unchanged, demand is unitary elastic (eD= 1). The shape of demand curve will be rectangular hyperbola. |
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