Consider the following. A specific market's demand function is D(p)= p e A where A>0 and e>1.
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Consider the following. A specific market's demand function is D(p)=peA where A>0 and e>1. A company's supply function for this market is s(p)=p, and its supply elasticity is just . The equilibrium price of the market isnA+eeA and the elasticity of the equilibrium price is+e1
How is the elasticity of the equilibrium price dependent on? What is the economic explanation? I know that when goes to infinity, the elasticity will go to 0, and when goes to 0, the elasticity will rise, but why?
Related Book For
Microeconomics An Intuitive Approach with Calculus
ISBN: 978-0538453257
1st edition
Authors: Thomas Nechyba
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