calculate elasticity of demand if AR=75 and MR=50
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Given : AR=75 and MR=50
To Find : calculate elasticity of demand
Solution:
MR = AR (e-1)/e
MR = Marginal revenue
AR = Average revenue / Price
e = elasticity of demand
MR = 50
AR = 75
=> 50 = 75 (e-1)/e
=> 2 = 3 (e-1)/e
=> 2e = 3e - 3
=> 3 = e
Hence elasticity of demand is 3
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