In: Economics
a. When examining the effect of price on demand, which factors are taken as given?
c. What does a firm use for predicting the revenue consequences of alternative output and pricing policy?
d. Do elasticity and slope mean the same thing? Explain.
e. “There is a direct relationship between MR and price elasticity” Discuss!
Answer a : While examing the effect of price on demand ,the other factors are considered as same. The factor which remain constant when we see the effect of price on quantity demanded are:
A b) As we know revenue is the income obtained by the firm through sale of goods and services. It has been useful for predicting that at different price level what is the revenue obtained. The importance of determing different revenue at different point of time are:
A c) Elasticity and Slope does not mean same thing. Elasticity and Slope are related to each other.
A d) The firm Marginal revenue is the additional revenue that the firm has gain from selling additional unit of good sold where as price elasticity is how responsiveness of quantity demand with change in its price.
Relationship is as follows :