Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Non Competitive markets

Question:
Price elasticity of demand under monopoly as compared to monopolistic competition is
Options:
Relatively elastic
Relatively inelastic
Zero
Infinity
Correct Answer:
Relatively inelastic
Explanation:
Demand under monopoly is relatively inelastic. A little change in price will not lead to a huge change in demand. If monopolist increases the price, consumers cannot reduce demand significantly because there is only a single seller whereas if a firm in monopolistic competition increases the price, consumers can easily switch to competitors leading to a much more change in demand.