Question

Suppose a firm is the exclusive supplier of Painite, the world's rarest gemstone. Output is sold in two markets, A and B. Assume consumers in the markets are unable to sell gemstones to one another and can only purchase directly from the firm. Market A has a more inelastic demand than market B. What can be said about the prices the firm charges in each market?

Answer 1

Answer:

d. Market A will have a higher price than market B

Explanation:

As we know that in the non elastic market, the seller could charge the high price while on the other hand in the elastic market it can charge a smaller price

as if there is an inelastic demand than it would leads to 1% rise in price that decrease the quantity demanded by smaller than 1%. Also if the price increased the total revenue also rises

And if there is an elastic demand than it would leads to 1% rise in price that decrease the quantity demanded by more than 1% and the price increased the total revenue is decreased

As it is given that the Market A contains more inelastic demand than market B so the seller charged a high price in market A than in Market B

Hence, the last option is correct