if in monopoly market AR is 50 and MR is 25 then the absolute value of elasticity demands
Answers
Explanation:
First, apply the formula to calculate the elasticity as price decreases from $70 at point B to $60 at point A:
%
c
h
a
n
g
e
i
n
q
u
a
n
t
i
t
y
3
,
000
−
2
,
800
(
3
,
000
+
2
,
800
)
/
2
×
100
200
2
,
900
×
100
=
6.9
%
c
h
a
n
g
e
i
n
p
r
i
c
e
60
−
70
(
60
+
70
)
/
2
×
100
−
10
65
×
100
−
15.4
P
r
i
c
e
E
l
a
s
t
i
c
i
t
y
o
f
D
e
m
a
n
d
6.9
%
−
15.4
%
0.45
Therefore, the elasticity of demand between these two points is
6.9
%
−
15.4
%
which is 0.45, an amount smaller than one, showing that the demand is inelastic in this interval. Price elasticities of demand are always negative since price and quantity demanded always move in opposite directions (on the demand curve). By convention, we always talk about elasticities as positive numbers. So mathematically, we take the absolute value of the result. We will ignore this detail from now on, while remembering to interpret elasticities as positive numbers.
This means that, along the demand curve between point B and A, if the price changes by 1%, the quantity demanded will change by 0.45%. A change in the price will result in a smaller percentage change in the quantity demanded. For example, a 10% increase in the price will result in only a 4.5% decrease in quantity demanded. A 10% decrease in the price will result in only a 4.5% increase in the quantity demanded. Price elasticities of demand are negative numbers indicating that the demand curve is downward sloping, but are read as absolute values. The following Work It Out feature will walk you through calculating the price elasticity of demand.
Answer:
The value of elasticity demand is 2.
Explanation:
In this question, we have to find the absolute value of elasticity demand. In the question, it is given that AR is 50 and MR is 25. From this information, we have to calculate the absolute value of elasticity demands. To calculate the elasticity demands we use a formula:
Hence, the absolute value of elasticity demands is 2. The value of elasticity demand is greater than 1 this means that demand is price elastic. If the elasticity demand is less than 1 it means that demand is price inelastic. If the elasticity demand is equal to 1 it means that is unit price elastic.
Hence, the absolute value of elasticity demand is 2.
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