Lecture23 - Lecture 23 Monopolistic production and demand...

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Lecture 23 Monopolistic production and demand elasticity Natural monopoly Monopsony Bilateral monopoly
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Demand Elasticity: a brief review When demand is inelastic, an increase in price results in a less-than-proportionate decrease in quantity: °±²³´µ¶µ´· ¸¹ º°»²¼º = % ¶½²¼¾° ¿À²¼´µ´· % ¶½²¼¾° Áµ¶° < 1 This means that even though quantity declines, revenues will go up with an increase in price: the monopolist will make enough more per sale on the remaining sales to offset the decline in total sales.
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Demand Elasticity and Revenues How do revenues change with a decrease in quantity? ° ±² °² = −² °± °² − ± °² °² = ± ² ± °± °² 1 = ± 1 −³° 1 When demand is inelastic, - E d < 1 and ± 1 ´µ¶ 1 >0 Revenues increase when quantity is lowered.
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Demand elasticity and monopoly pricing Or: revenues decrease when quantity increases. This
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This note was uploaded on 01/17/2012 for the course ECON 100A taught by Professor Safarzadeh during the Fall '09 term at UC Irvine.

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Lecture23 - Lecture 23 Monopolistic production and demand...

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