Question

Why is the demand curve with constant unitary elasticity concave?

Short answer

The demand curve with constant unitary elasticity is concave because at high prices, a one per cent rise in prices causes a one per cent rise in quantity.

Step-by-step solution

Step 1. Introduction:

A condition in which a price change of one percent leads in a quantity change of one percent is known as constant unitary elasticity in either a supply or demand curve. A demand curve having constant unitary elasticity has a curved shape and progresses from a higher slope on the left to a flatter slope on the right.

Step 2. Explanation:

Because a one percent reduction in price leads in more than one percent gain in output at higher prices, the demand curve with constant unitary elasticity is concave. The price drops are not similar in absolute terms. The left part of the curve begins with high prices and gradually decreases as it moves towards the right end. This creates a curved, concave shape with a steeper demand slope on the left and a flatter demand slope on the right.