Monopoly and price discrimination Managerial Economics
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Monopoly and price discrimination Managerial Economics

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Monopoly and price discrimination Managerial Economics Monopoly and price discrimination Managerial Economics Presentation Transcript

  • Monopoly and Price Discrimination
  • Monopoly • Monopoly is a market situation where there is only one seller but different customers. • The cross elasticity of demand for a monopoly is either zero or negative. • Monopolized industry is a single firm industry, equilibrium of the monopoly firm signifies the equilibrium of the industry.
  • Features of monopoly • A single seller • Unique product (no close substituites) • Price maker Firm ( Total control over the quantity supplied) • Entry of new firms is restricted View slide
  • Barriers of entry • Legal restrictions It make difficult for the new firms to attain license or permission. • control over key raw materials • Patent rights View slide
  • Price Discrimination • It is the ability to charge different prices to different individuals , called price discrimination.
  • Need for price discrimination • increase both output & profit. • Buying pattern of the individuals will be different • Increase the economic welfare. Eg: Air tickets, movie tickets,discount coupons etc.
  • Pricing under short run • Price and output based on revenue and cost.  AR faces a downward slopping demand curve in monopoly firm. Profit maximises monopoly chooses price and output at MR= MC.  E is the profit maximising output for the firm OM.
  • Pricing under long run • Monopolist get an oppurtunity to expand its firm for long run profits. • AR and MR curve shows the market demand. • Output and price determines monopolist long run profits. • Monopolist produce larger output and charge less price result in larger monopoly profit in the long run.
  • Short run Graph Cost and revenue MC AC Q P R S E 0 MR M output AR
  • Long run graph
  • THANK YOU