Microeconomics



Microeconomics

Elasticity of Demand is generally held in highly competitive markets like Monopolistically Competitive and Perfect Competition. Generally these markets hold homogeneous products that cannot be distinguished between producers. Perfect Competitive markets more so (extremely elastic because of a horizontal Demand Curve), while monopolistically ones just stamp a logo on. Generally, with high Elasticity of Demand, the more you raise price, the higher the surplus you gain; See it this way. Draw a horizontal Demand Curve (Mankiw, 2007). If you raise the price, you lose all consumers. If you lower the price, you'll go bankrupt. Now turn that curve at a ...