lectures in microeconomics-charles w. upton the monopolist’s demand curve

Lectures in Microeconomics-Charles W. Upton

The Monopolist’s Demand Curve

The Monopolist’s Demand Curve

The Monopolist’s Demand Curve

• Want to develop some key propositions about the demand curve

The Monopolist’s Demand Curve

The Monopolist’s Demand Curve

• Want to develop some key propositions about the demand curve

• Many of these center on elasticities

The Monopolist’s Demand Curve

The Monopolist’s Demand Curve

• Want to develop some key propositions about the demand curve

• Many of these center on elasticities

• Then some applications

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

• Recall our definition of point elasticity

Q

PSlope

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

• Recall our definition of point elasticity

• In the case of a linear demand function

Q = a – bP

Q

PSlope

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

• Recall our definition of point elasticity

• In the case of a linear demand function

Q = a – bP

Q

PSlope

Slope = -b

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

• A more general definition

Q

P

dP

dQ

The Monopolist’s Demand Curve

Restating the Elasticity

Q

P

dP

dQ

The Monopolist’s Demand Curve

Restating the Elasticity

P

Q

dPdQ11

Q

P

dP

dQ

The Monopolist’s Demand Curve

Restating the Elasticity

PP

Q

dPdQ

P

11

P

Q

dPdQ11

The Monopolist’s Demand Curve

Restating the Elasticity

PP

Q

dPdQ

P

11

QdQ

dPP

1

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

• The Monopolist cares about MR.

• There is a relation between MR and elasticity.

R = PQ

PQdQ

dP

dQ

dR

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

• The Monopolist cares about MR.

• There is a relation between MR and elasticity.

R = PQ

PQdQ

dP

dQ

dR

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

• The Monopolist cares about MR.

• There is a relation between MR and elasticity.

R = PQPQ

dQ

dP

dQ

dR

PMRQdQ

dP

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

PQdQ

dPMR

PMRQdQ

dP

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

PP

Q

dQ

dPPMR

PQdQ

dPMR

PMRQdQ

dP

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

1P

Q

dQ

dPPMR

PP

Q

dQ

dPPMR

PQdQ

dPMRPMRQ

dQ

dP

The Monopolist’s Demand Curve

Marginal Revenue and Elasticity

PMRQdQ

dP

1P

Q

dQ

dPPMR

PP

Q

dQ

dPPMR

PQdQ

dPMR

)1

1()11

(

PPMR

The Monopolist’s Demand Curve

First Elasticity Relation

11PMR

The Monopolist’s Demand Curve

Second Elasticity Relation

11PMR

The Monopolist’s Demand Curve

Second Elasticity Relation

11PMR

MCMR

The Monopolist’s Demand Curve

Second Elasticity Relation

11PMR

MCMR

11PMC

The Monopolist’s Demand Curve

Second Elasticity Relation

MCP 11

The Monopolist’s Demand Curve

Second Elasticity Relation

11

MCP

The Monopolist’s Demand Curve

Third Elasticity Relation

MCP 11

The Monopolist’s Demand Curve

Third Elasticity Relation

MCP 11

MCPP 1

The Monopolist’s Demand Curve

Third Elasticity Relation

MCPP 1

1PMCP

The Monopolist’s Demand Curve

Third Elasticity Relation

1PMCP

1

P

MCP

The Monopolist’s Demand Curve

Third Elasticity Relation

1

P

MCP

The Monopolist’s Demand Curve

A Summary

11PMR

11

MCP

1

P

MCP

The Monopolist’s Demand Curve

End

©2004 Charles W. Upton