An example Elasticity of demand for Kodak film is-2 P=[EF(1+EF)ⅹMC P=[-2/(1-2)×MC P=2×MC Price is twice marginal cost Fifty percent of Kodaks price is margin above manufacturing costs Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 An Example • Elasticity of demand for Kodak film is -2 • P = [EF /(1+ EF )]  MC • P = [-2/(1 - 2)]  MC • P = 2  MC • Price is twice marginal cost • Fifty percent of Kodak’s price is margin above manufacturing costs