Measure of Monopoly Power | Lerner's Index of Monopoly | Micro Economics | Ecoholics

Lerner Index is a measure of monopoly power which equals the markup over marginal cost as percentage of price. Its value ranges from 0, in case of a perfect competition, to 1, in case of a pure monopoly. It is the oldest measure and is based on the difference between the price charged by the monopolist and his marginal cost. Bober gives the formula 1/E. Thus, degree of monopoly power varies inversely with the elasticity of demand for the commodity. However, the more commonly used formula is: Degree of monopoly power = (P-MC) / P Where P is price charged by the monopolist and MC his marginal cost. In perfect competition, P = MC and the formula (P-MC)/P gives zero answer indicating no monopoly power. If the monopolized product is a free good, MC = 0 and the formula registers unity. The index of monopoly power thus varies from zero to unity. Since monopolized goods are seldom free, monopoly power is seldom as high as unity. Ecoholics is the largest platform for economics. Relationship between Average Revenue, Marginal Revenue and Elasticity of Demand :-   • Relationship between Average  Revenue, Mar...   Download our app: http://ecoholics.in/mobile-app/ Visit our website for further information and resources: http://ecoholics.in/ To Subscribe for Courses - https://subscription.ecoholics.in/ Reach out to us on Whatsapp for further information: https://wa.me/917880107880 If you’re preparing for competitive exams like UPSC IES, RBI DPER or UGC NET then Ecoholics is the one-stop destination for all your learning needs. Study economics the smart way and get an in-depth understanding of this dynamic subject with our holistic approach. Our team of expert faculties help you polish your knowledge and provides you with one-on-one mentorship and doubt-clearing sessions, so you leave no stone unturned when it comes to your preparation. By signing up with us, you can access our live classes, video lectures, test series and get the hard copy of study material delivered to your doorstep, so your preparation never hits a bump! Follow our social media handles to stay updated on all things economics. Follow Ecoholics on Twitter-   / ecoholics_in   Follow Ecoholics Facebook Group -   / 41907.  . Follow Ecoholics Facebook Page -   / ecoholics8   Follow Ecoholics on Instagram:   / ecoholics.in   Follow Ecoholics on Telegram: https://t.me/ecoholicsbysanat Become a Member of Largest Community of Economics: https://ecoholics.in/become-a-member/ #lerner #microeconomics #monopoly #economics #economic #economists #upsc #rbi #indianeconomicsservice #ias #iitjam #gateeconomics #ugcnet #ugc #jrf #economy #unionpublicservicecomission #ignou #dse #jnu #maentrance #pgentrance