Suppose that a monopolist sells a product to men and women. If the firm sets a s

Question

Suppose that a monopolist sells a product to men and women. If the firm sets a single price, the monopolist would produce 100,000 units and sell them at a price of $5.00 per unit. Suppose that at that price, the price elasticity of demand for men is 3.50, and the price elasticity of demand for women is 0.80. The monopolist is considering whether he should set discriminatory prices and asks for your advice. 2nd attempt Part 1 (1 point) 0 See Hint Suppose the monopolist is thinking about charging men a 10% higher price. If the monopolist does so, the quantity demanded by men would fall by Part 2 (1 point) 9 See Hint Suppose the monopolist is thinking about charging women a 10% higher price. If the monopolist does so, the quantity demanded by women would fall by O Type here to DOLL

Explanation / Answer

1. Price elasticity of demand= (change in quantity demanded / change in price)

For men,

- 3.50 = change in quantity demanded / 10

Or, change in quantity demanded= - 35

The minus sign represents the decrease in quantity demanded.

Therefore, if the monopolist charges 10 higher price to men, the quantity demanded by men would fall by 35.

2. For women,

- 0.8 = Change in quantity demanded / 10

Or, change in quantity demanded= -8

again the minus sign represents the fall in quantity demanded.

If the monopolist charges women a 10 higher price, then the quantity demanded by women would fall by 8.

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