What are the optimal markups for widgets and gadgets

Reference no: EM13202455

what are the optimal markups for widgets and gadgets?

Marginal revenue = Price(1 + 1/Price elasticity)
since price is positive (always) so we can ignore that part when determining the sign of MR
MR is negative if 1+1/elasticity is negative and positive if its positive
For gadgets: 1/-1.5 = -.66667 , 1+-.6667 > 1 , so MR is positive
For widgets 1/-.75 = -1.3333, 1+-1.33333 = -.3333 so MR is negative

Reference no: EM13202455

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