Under Monopoly, price discrimination depends upon:
Options
AElasticity of demand for commodity
BElasticity of supply for commodity
CSize of market
DAll of above
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Price Determination in Different MarketsPYQ - July 2021Question 68 of 20
All Questions Correct Answer
✅ Option a — Elasticity of demand for commodity
All Options:
- AElasticity of demand for commodity
- BElasticity of supply for commodity
- CSize of market
- DAll of above
Detailed Solution & Explanation
To understand price discrimination under monopoly, we need to consider the following points:
• Price discrimination occurs when a monopolist charges different prices for the same product in different markets.
• This is possible when the monopolist can separate the markets and prevent resale between them.
• The key factor that determines the extent of price discrimination is the elasticity of demand for the commodity.
• If the demand is elastic, the monopolist will charge a lower price to capture more of the market, and if the demand is inelastic, the monopolist will charge a higher price to maximize revenue.
The correct answer is based on the concept of price elasticity of demand, which is a fundamental principle in microeconomics.
• Elasticity of supply and size of market are not directly related to price discrimination under monopoly, making them incorrect options.
• The law of demand and the concept of monopoly power also support the idea that elasticity of demand is crucial for price discrimination.
About This Chapter: Price Determination
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Perfect Competition, Monopoly, Monopolistic, Oligopoly
This high-weightage chapter covers all four market structures: Perfect Competition, Monopoly, Monopolistic Competition, and Oligopoly. Students learn how price and output are determined under each structure, along with key concepts like Price Discrimination, Kinked Demand Curve, and the conditions of equilibrium (MR = MC).
View Official ICAI SyllabusExam Strategy Tip
This chapter carries the highest weightage (~15%). Focus on features of each market, the shape of AR and MR curves, and understand why firms in Perfect Competition are 'Price Takers' while Monopolists are 'Price Makers'.
Key Concepts to Understand
Related Comparison Tables
More Questions from Price Determination in Different Markets
Under which of the following forms of market structure does a firm have no control over the price of its product?
A firm encounters its "shutdown point" when:
Kinked demand curve hypothesis is designed to explain in context of oligopoly
Which of the following is not a characteristic of a "Price Taker"?
Price discrimination will be profitable only if the elasticity of demand in different markets is:
Which of the following is not an essential condition of pure competition?
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