# mrp

I thought steeper the demand curve, it is more elastic. Could you please explain why it is inelastic in the following question --------------------- The steeper a firm’s marginal revenue product curve for a given resource, the: A) more elastic the firm’s demand curve for the resource. B) higher the mobility of the resource. C) lower the mobility of the resource. D) less elastic the firm’s demand curve for the resource. Your answer: A was incorrect. The correct answer was D) less elastic the firm’s demand curve for the resource. The marginal revenue product curve of a resource for a given firm will directly determine the firm’s demand curve for the resource. If the marginal revenue curve for a resource is steep, then the demand curve for the resource will be steep. Resource mobility is not determined by its MRP.

I guess that steeper marginal revenue product means that an increase in resource creates a big increase in productivity - therefore the demand will be more inelastic- the producers will use it even if it becomes more expensive ?

chinni234 Wrote: ------------------------------------------------------- > I thought steeper the demand curve, it is more > elastic. Could you please explain why it is > inelastic in the following question > --------------------- —what made you think that?.. think about the extreme cases, a perfectly inelastic demand curve is a vertical line, and a perfectly elastic demand curve is a horizontal line, i’m pretty sure a vertical line is “steeper” than a horizontal line… > The steeper a firm’s marginal revenue product > curve for a given resource, the: > A) more elastic the firm’s demand curve for the > resource. > B) higher the mobility of the resource. > C) lower the mobility of the resource. > D) less elastic the firm’s demand curve for the > resource. > > Your answer: A was incorrect. The correct answer > was D) less elastic the firm’s demand curve for > the resource. > > The marginal revenue product curve of a resource > for a given firm will directly determine the > firm’s demand curve for the resource. If the > marginal revenue curve for a resource is steep, > then the demand curve for the resource will be > steep. Resource mobility is not determined by its > MRP.