Question
The price elasticity of demand measures the percentage change in sales for a given percentage change in the goods price, all other factors held constant:
The price elasticity of demand measures the percentage change in sales for a given percentage change in the goods price, all other factors held constant:
Ep = {change inQ/Q}/ {change in P/P}
a. Demand is unitary elastic if Ep = -1. In turn, demand is elastic if EP < -1. Finally, demand is inelastic if -1 < Ep < 0
b. Revenue is maximized at the price and quantity for which marginal revenue is zero or equivalently the price elasticity of demand is unity.
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Econometric Analysis
Authors: William H. Greene
5th Edition
130661899, 978-0130661890
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