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CUET Economics 2025 PYQs28 May Shift 1. Free, no login required.

Micro

past year questions, CUET Economics 2025 28 May Shift 1

Production & Costs

past year questions, Micro, CUET Economics 2025 28 May Shift 1

Medium

Which of the following statements are correctly explaining the relationship between the marginal revenue (MR) and price elasticity of demand?

(A). Price elasticity is less than 1 when MR is negative.

(B). Price elasticity is more than 1 when MR is negative.

(C). Price elasticity is more than 1 when MR is positive.

(D). Price elasticity is less than 1 when MR is positive.

Choose the correct answer from the options given below:

  1. (A) and (D) only
  2. (A) and (B) only
  3. (B) and (D) only
  4. (A) and (C) only

Solution

✅ Correct Option: 4

Option 1 -> States that (A) and (D) are correct. However, (D) is incorrect because when elasticity < 1 (inelastic demand), MR is negative, not positive.

Option 2 -> States that (A) and (B) are correct. However, (B) is incorrect because when elasticity > 1 (elastic demand), MR is positive, not negative.

Option 3 -> States that (B) and (D) are correct. Both statements are incorrect as explained above.

Option 4 -> States that (A) and (C) are correct, which accurately reflects the relationship between MR and price elasticity.

Hence, Option 4: (A) and (C) only -> The relationship between MR and price elasticity is given by MR = P(1 - 1/|Ed|). When |Ed| < 1 (inelastic), 1/|Ed| > 1, making (1 - 1/|Ed|) negative, thus MR < 0 (statement A is correct). When |Ed| > 1 (elastic), 1/|Ed| < 1, making (1 - 1/|Ed|) positive, thus MR > 0 (statement C is correct). When |Ed| = 1 (unit elastic), MR = 0. Therefore, statements (A) and (C) correctly explain the relationship. -> correct

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