The price elasticity of demand for a linear demand function, D(p)=b−ap is given by Q=E(p)=(ap)/(b-ap)?
Rewrite the formula to express price as a function of elasticity
b) What is the long-term behavior of g?
As elasticity increases without bound, the price at which this elasticity occurs approaches
- ?Lv 71 year ago
E= ap/(b - ap)
Eb - Eap= ap
Eap + ap= Eb
p(Ea + a)= Eb
p= g(Q)= Eb/(Ea + a)= Eb/[a(E + 1)]
As E→∞, p→b/a