Relationship between Average Revenue, Marginal Revenue, and Elasticity of Demand

Learning Objectives

• Relationship between AR, MR, and Elasticity of Demand
  • Graphical Derivation
  • Derivation through Calculus

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When,
Elasticity (e) = -1, MR = 0
Elasticity (e) < -1, MR >0
Elasticity (e) > -1, MR<0
Note: Elasticity of demand always lies between (-∞,0).