Monopoly, PED. ISI 2007

[Spiti]

[Granpa Simpson]

elasticity in the private market is 3.

[Spiti]

Can you please explain how?

[Dreyfus]

@spiti....use MR in price elasticity form ....then at optimum both MR from gov nd private mkt must be same ....

[Ashima]

So, if I use MR= P(1+1/e) and do MRG= MRP, I am still getting eP in terms of eG. Please explain how did you get 3 Subhayu/ Vaibhav? :(

[Dreyfus]

@ashima  since price for govt is fixed at 100 dat means dp/dq=0 ie demand curve is horizontal therefore ed for gov is infinity
100(1+0)=150(1+1/edpvt)
edpvt=-3