Monopoly Pricing and Elasticity of Demand

… a core concept in Economic Analysis and Atlas102

Click for MRU video

Click for MRU video

Concept description

Alex Tabarrok (reference below, video on right) examines the relationship between the monopolist’s profit-maximizing price and the demand for the monopolist’s product.

Using an example from the pharmaceutical industry, Tabarrok explains why the Monopoly Markup will be higher when the demand is less elastic.

MarkupAndDemandHe illustrates this with two demand curves:

MarkupAndElasticity

Practice questions

At http://www.mruniversity.com/node/267374, accessed 7 May 2016.

  1. What’s the rule: Monopolists charge a higher markup when demand is highly elastic or when it’s highly inelastic?

Atlas topic, subject, and course

Monopoly and Price Discrimination (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

Alex Tabarrok, The Monopoly Markup (9-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/monopoly-profit-maximization-price-aids-medication, accessed 7 May 2016.

Page created by: Ian Clark, last modified 7 May 2016.

Image: Alex Tabarrok, minute 0.14 of The Monopoly Markup (9-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/monopoly-profit-maximization-price-aids-medication, accessed 7 May 2016.