Discrimination Not Profitable Wire” tire Dem and Curves Are lso-elastic
In order to prove that unless the elasticity of demand in the sub-markets is different discrimination will not be profitable. we shall take the two markets where the demand curves arc iso-clastic, i.e.• where. at every price. elasticity of demand curve is the same. When in the two markets elasticity of demand is the same, then the marginal revenue will also be the same.” Marginal revenue in the two nlarkets being the same. it will not be profitable to transfer any unit of the commodity from one market to another in order to charge a different price. This will be clear from the above diagram (Fig. 28.7). In this diagram. the demand curves ARe (in market A) and ARb (in market B) have the same elasticity at the price OJ>as at any other price (OP = M. H.= Ml H2). At this price (OP). marginal revenue in the two markets is the same (M.S.= M2 5,2)’ Now if the monopolist transfers some units of the commodity from the market A hy reducing M. N. to the market Ii adding M2 N2 • then the lo in market A shown in the shaded area M. S. T. N. is greater than the gain Mz S2 1’2 N2 in the market B. This shows that when the demand curves have the same elasticity in the sub-markets price discrimination will not be profitable.
[av_button label='Get Any Economics Assignment Solved for US$ 55' link='manually,http://economicskey.com/buy-now' link_target='' color='red' custom_bg='#444444' custom_font='#ffffff' size='large' position='center' icon_select='yes' icon='ue859' font='entypo-fontello']