A price-discriminating monopolist charges p₁ in market 1 and p₂ in market 2. If p₁ p₂, the absolute value of the price elasticity in market 1 at price p₁ must be smaller than the absolute value of the price elasticity in market 2 at price p₂.

Question

A price-discriminating monopolist charges p₁ in market 1 and p₂ in market 2. If p₁ > p₂, the absolute value of the price elasticity in market 1 at price p₁ must be smaller than the absolute value of the price elasticity in market 2 at price p₂.

Quizplus · Accepted Answer

If the monopolist charges a higher price in market 1 than in market 2, it implies that the demand in market 1 is less elastic than in market 2. Therefore, the absolute value of the price elasticity in market 1 at price p₁ must be smaller than the absolute value of the price elasticity in market 2 at price p₂.

A Price-Discriminating Monopolist Charges P1 in Market 1 and P2

A Price-Discriminating Monopolist Charges P₁ in Market 1 and P₂