Answer to Question #288199 in Macroeconomics for atuk

Question

suppose you are a monoipoliste and findthe demand elasticity of your product is different in two market what would be your pricing strategy answer?

Answer 1

Being a monopolist implies the act of monopolizing in a product within a geographical location. In simple lame man language, it means the act of being known as the dominant seller or producer of a product within a locality.

So, suppose I, as a monopolist, then finds out that demand elasticity of my product is different in two markets, my pricing strategy of the two markets would then be different to suite the demand elasticity of the markets which would thus give me upper edge as a monopolist to monopolize on the said product with the markets.

For example, let us assume I sell Margarine and that the demand elasticity in the Market A is different from that of Market B. For me to stay up monopolizing such that I remain the ONLY MAJOR SELLER OF MARGARINE IN BOTH MARKETS would imply that I adjust in my pricing to conform with the demand elasticity of the markets. That is, if I sell Margarine for $25 in Market A as a monopolist of the product under the demand elasticity say k. If the demand elasticity for the Market B is then less than k, there is then need to increase price to like, say $45. This is the reasonable strategy because DEMAND is greatly influenced by PRICE CHANGE.