Question

When elasticity of demand is equal to one, MR will be equal to _______.

• A. one
• B. zero
• C. Infinity
• D. negative

Answer 1

The correct option is B zero

We know the relationship between $MR$ and elasticity demand is,

$MR=AR(1-\frac{1}{e})$

So, when elasticity demand is one means $e=1,$ then

$MR=AR(1-\frac{1}{1})$

$MR=AR(1-1)$

$MR=AR\left(0\right)$

$\therefore$ $MR=0$

$\therefore$ When elasticity of demand is equal to one, $MR$ will be equal to $zero.$