Ayushi posted an Question
August 13, 2020 • 18:21 pm 30 points
  • UGC NET
  • Economics

87. marginal revenue will be negative, if the demand is (1) rclatively clastic (2) relatively inelastic (3) perfectly elastic (4) unitary elastic

87. Marginal Revenue will be negative, if the demand is (1) Rclatively clastic (2) Relatively inelastic (3) Perfectly elastic (4) Unitary elastic

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    Nidhi taparia best-answer

    The correct answer is (2) relatively inelastic. This question can be solved using the geometric method of calculating elasticity. When MR is negative, demand or AR curve is below its middle point. To calculate elasticity by geometric method at such a point, E = lower portion / upper portion Since this is the lower end of AR curve, lower portion < upper portion or lower portion / upper portion < 1 Hence E < 1 or the curve is relatively inelastic at that point where MR < 0.

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