If Jim’s Home Goods price elasticity of demand is −2, and its profit maximizing price is $6, then its: average cost is $3.00. average cost is $0.33. marginal cost is $3.00. marginal cost is $0.33. average cost is $5.67.
If Jim’s Home Goods
- average cost is $3.00.
- average cost is $0.33.
- marginal cost is $3.00.
- marginal cost is $0.33.
- average cost is $5.67.
Price elasticity of demand: It is the responsiveness of the percentage change in the quantity demanded of a commodity because of the percentage change in the price of the commodity. The price elasticity of demand is measured as:
If the value of the price elasticity of demand is infinity it is considered perfectly elastic.
If the value of the price elasticity of demand is more than 1 it is considered relatively elastic.
If the value of the price elasticity of demand is equal to 1 it is considered unitary elastic.
If the value of the price elasticity of demand is less than 1 it is considered relatively inelastic.
If the value of the price elasticity of demand is equal to zero it is considered perfectly inelastic.
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