Question

when Monopoly seller reaches at equilibrium then price elasticity of demand will be-
a) E-1
B)E<1
C)E>1
D)E=1​

Answer 1

Hey mate ur answer is E<1

Answer 2

When the monopoly reaches equilibrium point of production,the price elasticity of demand is greater than 1 or e>1.Thus,the correct answer is option C) or e>1.

Explanation:

To explain in simple terms,monopoly maximizes its profit at the production level where Marginal Revenue of production(MR) is equal to the Marginal Cost of production(MC).Now,if the price elasticity of demand is relatively more elastic,consumers are more reactive or responsive to the any price change of the product/community and thus,if the monopoly reduces its product price,the consumer demand would increase significantly and so will the MR.On the contrary if the price elasticity of demand is relatively inelastic,there will little in consumer demand even after price decrease by the monopoly due to low consumer responsiveness of the consumers.Therefore,the monopolist would prefer to operate at the elastic part of the downward sloping demand curve and maximize profit at the point where the demand is elastic or e>1.