Principles of Microeconomics / Unit 8 MIC 0715 short lesson, about 20 seconds
Marginal Revenue and Elasticity
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The idea
Positive marginal revenue means elastic demand; zero, unit elastic; negative, inelastic. A profit maximizer with any marginal cost never produces where marginal revenue is negative, so it stays elastic.
In practice
On the inelastic part, raising the price raises revenue and cuts cost.
Where people slip
Revenue peaks where marginal revenue is zero; profit at a smaller quantity, unless marginal cost is zero.
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