In a pure mono poly marke t, only the latter effec t is at work, and so, partic ularly f or inflex ible comm oditie s such as medic al care, the drop in units sold as price s rise may be much less dramatic than one might expect. In most real markets with claims, falling demand associated with a price increase is due partly to losing customers to other sellers and partly to customers who are no longer willing or able to buy the produ ct. If the y set it highe r, they sell le ss. In contrast, a business with monopoly power can choose the price t hey w ant to sell at. A price taker cannot choose the price that they sell at, since if they set it above the equilibrium price, they will sell none, and if they set it below the equilibrium price, they w ill have an infi nite nu mber of buy ers (a nd be making less m oney than t hey co uld if they sold at the equilibrium price). This is in contrast to a price taker that faces a horizontal demand curve. In economics a company is said to have monopoly power if it faces a downward sloping demand curve (see supply and demand).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |