MGCR 293 Lecture Notes - Lecture 5: Marginal Revenue
20 Sep 2016
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Percentage change in quantity demanded resulting from a 1 percent change in price. Generally will vary from one point to another on a demand curve. It lies between zero and infinity h= (dq/dp)(p/q) What is the ped if price = 500$ h= dq/dp (p/q) h=(-10/500) (500/30) h= - . Using the demand function to find the price elasticity of demand. Specify the point on the demand curve at which the price elasticity is to be measured, and then find q. We know that dq/dp= -b (derivative of q with respect to p) To obtain the price elasticity of demand, use h= dq/dp (p/q) Elastic increase in price= decrease in total revenues. Inelastic increase in price= increase in total revenues. Goal: get as close as possible to unit elasticity. Mr=dtr/dq, since total revenue equals price time quantity then mr=d(pq)/dq. If h = -1, marginal revenue is zero.
