what is the learner index and this is going to be a measure that we look at when we're looking at Monopoly style models and of course Monopoly includes some types of oligopoly models and monopolistic competition models but the learner index is going to be the price minus the marginal cost over the price so one way of interpreting that is the percentage of the price that is a markup above marginal cost so denominator is price uh numerator is price minus marginal cost so how much is the company marking up price above what they're paying at the margin for that thing and of course in this case it looks like about 2/3 of this price your paying is over and above marginal cost now um this is going to be of course if the demand curve is linear it's going to be one over the elasticity of demand uh that's facing the firm so this this would be the firm's demand not the market demand but one key here is if you take this demand curve and make it more elastic the the percentage of the price that's a markup over marginal cost is going to shrink you can kind of see that uh graphically and so that's why the learner index is inversely related to the elasticity of demand and of course Monopoly firms are going to try to create a more inelastic Demand by making their product more different ated from everything else uh more needed by people so that people will buy it no matter what the price however you don't necessarily want to interpret this as um a high learner index as always being bad for example in this case we have 2/3 of the price you're paying is markup above marginal cost but the thing is marginal cost does not include the fixed costs of the product so like I teach Healthcare economics in healthcare what percent of the goods you're paying for is the the plastic involved in the surgical instrument and the medications at the margin and even the labor at the margin it's actually somewhat small of a percentage because a lot of Medical Care is going to be the running of the hospital the buying of these huge fixed cost machines that you have to use when you get a scan like when you get a scan of some an MRI uh you don't pay at the margin or certainly the marginal cost does not include the cost of that scanning equipment but obviously you need the the scanning equipment so because fixed costs are not at all built into the marginal cost structure you don't know if this is bad you don't know if the firm is cheating you just because you have a high learner index all you know if there's a high learner index is that most of the money you're paying is going towards something that is that is not the marginal cost