Price elasticity at terminal points, Managerial Economics

Assignment Help:

Price Elasticity at Terminal Points

The price elasticity at terminal point N equals 0 means that at point N, e = 0. At terminal point M, although, price-elasticity is undefined, however most texts show that at terminal point M, e = ∞. According to William J. Baumol, a Nobel Prize winner, price elasticity at upper terminal point of the demand curve is undefined. It is undefined since measuring elasticity at terminal point (M) includes division of zero and division by-zero is undefined. In his own words, 'Here elasticity isn't even defined since an attempt to evaluate thefraction p/x at that point forces us to commit the sign of dividing by zero. The reader who has forgotten why division by zero is immoral can recall that division is the reverse operation of multiplication. Since in seeking the quotient c = a/b we look for a number, c that when multiplied by b gives us the number a, which is, for which cb = a. But if a isn't zero, say a = 5 and b is zero, there isno such number since there is no c such that c x 0 = 5".


Related Discussions:- Price elasticity at terminal points

Economics, What limitations are inherent in the economist’s view of pricing...

What limitations are inherent in the economist’s view of pricing?

Economic Model of a Company, I can''t figure out the economic model of a co...

I can''t figure out the economic model of a company that I''m supposed to write a report about. The company is a tier 2 supplier, and over the years has bought out several subsidia

Theory of demand, when the data is descrete and incremental changes is meas...

when the data is descrete and incremental changes is measurable, what is it?

Production and cost analysis , What is the formula of finding Fixed cost of...

What is the formula of finding Fixed cost of a quadratic function

Law of demand, explain the law of demand. briefly discuss the exception to ...

explain the law of demand. briefly discuss the exception to the law of demand

Objectives of icas, Objectives of ICAs Most schemes have as their main...

Objectives of ICAs Most schemes have as their main objective to stabilize and/or increase the world price of commodity, producers' incomes, foreign exchange earnings of export

Income elasticity of demand, Aside from the price of a product and its subs...

Aside from the price of a product and its substitutes, another significant element of demand for a product is consumer's income. As noticed previously, relationship between demand

Volatility of the stock market, You have been provided with daily data star...

You have been provided with daily data starting in January 2009 on the main New Zealand stock market index, the NSX-50. Choose a suitable model for measuring volatility on the New

Pigou effect, The pigou effect, also called the real balance effect, is nam...

The pigou effect, also called the real balance effect, is named after the well known Cambridge school economist Arthur Cecil pigou who had first clearly formulated the relationship

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd