The price elasticity of demand for a monopolist's product depends on
A) the number and similarity of substitutes.
B) the ATC of the item it produces.
C) the AVC of the item it produces.
D) the MC of the item it produces.

Question

Quizplus · Accepted Answer

The price elasticity of demand measures how consumer demand changes in response to changes in price. The number and similarity of substitutes available to consumers is one of the major factors that determines the price elasticity of demand for a product. If there are many close substitutes available, consumers will be more likely to switch to a different product if the price of the monopolist's product increases, resulting in a higher price elasticity of demand. On the other hand, if there are few or no substitutes available, consumers may be willing to pay a higher price for the monopolist's product, resulting in a lower price elasticity of demand. The other factors listed may impact the monopolist's costs of production, but they are not directly related to the price elasticity of demand.

The Price Elasticity of Demand for a Monopolist's Product Depends