Question

The inverse demand function for monopolist’s product is given by P = 100 – 2Q and the cost function C = 10 + 2Q, if the monopolist succeeded in dividing the market into two segment (on the basis if elasticity of demand differences)

Answer 1

When we move upward along a linear demand curve (higher price and lower quantity demanded) the inverse of slope of the demand curve stays the same but ratio of price and quantity rises throughout, thus price elasticity of demand rises.