Question

I need to write a forum on lerner index from a mangers perspective in economics not less that 75 words post must relate a concept to a real world situation it come from direct information from the text please relate it to something in the real world put it in your words. lerner index is a measure of the difference between price and marginal cost as a fraction of the product's price.

Answer 1

• Learner Index = (P-MC)/P or 1/e
• Learner index measures monopoly power of firm in the market. The value Learner index varies from 1 to 0. Higher value signifies higher degree of monopoly power. Monopoly power is inversely related to the elasticity of demand. Monopoly power gets reduced if demand is elastic.
• Value of learner index is close zero if we study price behavior of firm in agricultural sector and on other hand taking up an example of wine industry, we see that learner index value is close to maximum ones, in other words, monopoly pricing more reflected in wine industry.