passwella.
Menu

JAMB Economics 1991 Question 21

Question 21

Elasticity

Use the diagram (demand and marginal revenue curves). Demand is relatively inelastic

Diagram for this question
  1. A.at P2 range
  2. B.in the P2 P4 price range
  3. C.at P3 only
  4. D.at any price below P2
Show the answer and explanation

Answer: D (at any price below P2)

Explanation

MR is zero at output Q2, where the demand price is P2, so demand is unit elastic at P2. Below P2 MR is negative, which means demand is inelastic.