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Here we illustrate the effect of output demand elasticity on input demand elasticity. In the upper graphs D is very elastic, giving elastic MR and relatively elastic input demand, MRP. In the lower graph D is more inelastic and as a result so is MRP.
Because Factor demand is derived from output demand, more elastic output demand means that a drop in price leads to greater sales and a need for more inputs than if demand were more inelastic.
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