MATA33H3 Lecture Notes - Lecture 11: Marginal Revenue, Piecewise, Linear Combination
Elasticity of Demand
p = price
q = quantity sold/demand
Usually, p = f(q)
Economists need to understand how change in one quantity effects the other
to understand this, they use the quantity elasticity of demand, ◦
Find n in terms of q if
Categories of n
small relative change in price results in large relative change in demand
relative change in price = relative change in demand
large relative change in price results in small relative change in demand
Given the following equation of demand. Determine the category of n
Revenue
r = pq
We want to understand the effect of r when p or q is changed
1. Marginal revenue = 2.
If h is sufficiently small, then we can
approximate n by taking the lim h->0.
In this case,
Recall that f(q) = p
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