## economics deepak kanodia

deepakkrkanodia
Finance Junkie
Posts: 49
Joined: Thu Aug 09, 2012 4:45 pm

### economics deepak kanodia

Q1. PLEASE EXPLAIN THE FOLLOWING STATEMENTS :

a) when regulators force monopolists to follow marginal price, price is fixed where MC curve intersects demand curve
b) when regulators force monopolists to follow average cost price, price is fixed where ATC curve intersects demand curve

Q2. PLEASE EXPLAIN NUMERICALLY PERFECTLY ELASTIC, ELASTIC, UNIT ELASTIC ,INELASTIC AND PERFECTLY INELASTIC.(plz explain by numeric examples)

shreyas
Finance Junkie
Posts: 83
Joined: Thu Jul 19, 2012 6:49 pm

### economics deepak kanodia

Unit Elastic: Suppose quantity sold of Apple goes down by 10 unit with increase in price by INR 10, then we can say, Apple has Elasticity equals to 1 (Elasticity= Change in Quantity/Change in price= 10/10=1)
Perfectly Elastic: There are no goods which are perfectly elastic. If you see the formula of Elasticity it is a ratio of Change in Quantity with change in Price and for perfectly elastic goods even small change in price would result in major change in quantity which might be infinity, which is impossible in real world. Hence for Perfectly Elastic goods, Elasticity=Infinity/0.00000…1=Infinity-->Not Possible
Perfectly Inelastic: This is again not possible. As Elasticity (E=Change in Q/Change in P) for perfectly inelastic goods is not defined, because for any huge change in price, there won’t be any change in quantity.
E=0.0000000…1/Infinity=Not defined and not possible.

deepakkrkanodia
Finance Junkie
Posts: 49
Joined: Thu Aug 09, 2012 4:45 pm
Ok so what does elasticity of -1 (minus 1) means. does it also mean unit elastic.

plz also give examples of relatively elastic and relatively inelastic.