For a PC firm this equilibrium condition occurs where the perfectly elastic demand curve equals minimum average cost.
2.
If the product has an elastic demand, a greater portion of the tax will be absorbed by the seller.
3.
Boyce et al . ( 1988 ) summarize the research on Network Equilibrium Problems, including the assignment with elastic demand.
4.
This is because goods with elastic demand cause a large decline in quantity demanded for a small increase in price.
5.
For example, seniors have a more elastic demand for movies than do young adults because they generally have more free time.
6.
This means that an individual firm's demand curve is downward sloping, in contrast to perfect competition, which has a perfectly elastic demand schedule.
7.
For any monopoly, the price markup should be inverse to the price elasticity of demand : the more elastic demand for the product, the smaller the price markup.
8.
For example, airlines routinely engage in price discrimination by charging high prices for customers with relatively inelastic demand-business travelers-and discount prices for tourist who have relatively elastic demand.
9.
Generally the company charges a higher price to the group with a more price inelastic demand and a relatively lesser price to the group with a more elastic demand.
10.
However, if the company increases the prices of its products, this will lead to a drop in demand as most of them are classified as supplementary and have elastic demand.
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