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Suppose the equilibrium price in the market is $60 and the marginal revenue associated with the linear (inverse) demand function is $20. Then we know that the own price elasticity of demand is?
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Suppose the equilibrium price in the market is $60 and the marginal revenue associated with the linear (inverse) demand function is $20. Then we know that the own price elasticity of demand is?

User Rupam
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Answer:

Step-by-step explanation:

the own price elasticity of demand calculated with the formula

MR ( marginal revenue ) = P ( equilibrium price ) ( 1 + (1/ ED) where ED is price elasticity of demand

20 = 60 ( 1 + ( 1/ED)

(20 / 60) - 1 = 1 / ED

-0.6667 = 1 / ED

ED = 1 / - 0.666667 = -1.5

User Gobra
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