Can You Explain The Price And Output Determination Under Price Discrimination (PD)?

Under such PD we present the following propositions monopolist has two markets to sell his output. Accordingly the demand curve of monopolist is the horizontal summation of demand curve face in two different markets with we called DM. corresponding to such demand curve there will be summed marginal revenue which we give the name MR.
The equilibrium of the monopolist who is discriminating will take lace where MC cuts MR, the output so determined will be solved in two markets.

The elasticity to demand faced by monopolist is different in two markets. The market where the demand is more eclectics he will charge low price. While the market where demand is less elastic he will charge high price. This means that monopolist charge different prices on the ground or difference in elasticity's of demand for his product.The profits of discriminating monopolist will be high if he discriminates as compared with these situation does not where He discriminate.

The cost of production AC and MC faced by the monopolist against the product solved in different markets are similar. The total output produced by the monopolist is fully sold in two markets.

Add Comment

Report