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Expenditure and Elasticity

What isthe va...

Question

What is the value of the MR when the demand curve is elastic?

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Solution

When demand curve is elastic (e_d > 1), then according to the relationship MR = P, the fraction will be less than 1.

Hence, MR will be positive when P is positive.

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What is the value of the MR when the demand curve is elastic ?

Q. When MR is zero the elasticity of demand on AR curve is _______.

Q.
When the slope of demand curve =

\infty

, price elasticity of demand =0.

When the slope of demand curve = infinity, the price elasticity of demand = 0.

Show with the help of a diagram, the effect on equilibrium price and quantity when:
(i) Demand is perfectly elastic and supply decreases.
(ii) Supply is perfectly inelastic and demand increases.
(iii) The demand curve is perfectly elastic and the supply curve shifts outwards.

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