Question

The average revenue R_A is 50 and elasticity of demand η is 5, the marginal revenue R_M is ______.

Answer 1

The average revenue R_A is 50 and elasticity of demand η is 5, the marginal revenue R_M is 40.

Explanation:

The marginal revenue RM is calculated using the formula: 

`R_M = R_A xx ((η - 1)/η)`

Given:

• Average Revenue (R_A) = 50
• Elasticity of Demand (η) = 5

`R_M = 50 xx ((5-1)/5)`

= `50 xx 4/5 = 40` 

Marginal Revenue (RM) = 40