If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities,then
A) consumers who buy larger quantities have a higher price elasticity of demand.
B) consumers who buy larger quantities have a lower price elasticity of demand.
C) consumers who buy smaller quantities have a lower price elasticity of demand.
D) Both A and C.

Question

Quizplus · Accepted Answer

If a monopoly charges higher prices to consumers who buy smaller quantities than to consumers who buy larger quantities, it implies that consumers who buy smaller quantities have a relatively more elastic demand as compared to consumers who buy larger quantities. This is because higher prices for smaller quantities will lead to a greater reduction in demand as compared to the lower prices for larger quantities. Thus, consumers who buy larger quantities have a lower price elasticity of demand, and consumers who buy smaller quantities have a higher price elasticity of demand. Therefore, both A and C are correct.

If a Monopoly Charges Higher Prices to Consumers Who Buy