DECA+ Business Management and Administration Practice Exam

What characterizes unitary demand?

1. Sales increase when prices drop

2. Sales remain the same despite changes in supply

3. Demand decreases when prices increase

4. Demand is directly proportional to supply

The correct answer is: Sales remain the same despite changes in supply

Unitary demand is characterized by a unique relationship between price and quantity demanded. In the case of unitary demand, the price elasticity of demand is exactly one, meaning that any change in price will result in a proportional change in quantity demanded. Therefore, if prices change, the total revenue remains unchanged because the percentage change in quantity demanded offsets the percentage change in price. The correct choice indicates that sales remain the same despite changes in supply, which aligns with the concept of unitary demand in that shifts in price do not affect the quantity demanded disproportionately. Thus, demand is stable and reflects a balance where changes in supply do not influence the sales figures. In contrast, the other options reflect different economic principles. For instance, sales increasing when prices drop is indicative of normal demand behavior rather than unitary demand. Demand decreasing when prices increase relates to the law of demand, which typically applies to most goods. The statement about demand being directly proportional to supply does not fit under unitary demand, as it suggests a more rigid relationship between demand and supply beyond proportionality based solely on price changes.