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Question
Find the elasticity of demand, if the marginal revenue is 50 and price is Rs 75.
Solution
Given, marginal revenue `("R"_"m") = 50` and price (P) = ₹ 75
using, Rm = p`(1 - 1/η)`
∴ 50 = 75 `(1 - 1/η)`
∴ `50/75 = 1 - 1/η`
∴ `2/3 = 1 - 1/η`
∴ `1/η = 1/3`
∴ η = 3
∴ elasticity of demand = 3
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∴ π = `square`
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A manufacturing company produces x items at a total cost of ₹ 40 + 2x. Their price per item is given as p = 120 – x. Find the value of x for which elasticity of demand for price ₹ 80.
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∴ x = 120 – p
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∴ Elasticity of demand is given by η = `- "P"/x*("d"x)/("dp")`
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