The price elasticity of demand measures the percentage change in sales for a given percentage change in the goods price, all other factors held constant:

E_p = {change inQ/Q}/ {change in P/P}

a. Demand is unitary elastic if E_p = -1. In turn, demand is elastic if E_P < -1. Finally, demand is inelastic if -1 < E_p <  0

b. Revenue is maximized at the price and quantity for which marginal revenue is zero or equivalently the price elasticity of demand is unity.

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Both the demand and supply curve show the relationship between price and the number of units demanded or supplied Price elasticity is the ratio betwee... View the full answer