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Some people say that if there is a monopoly producer they can charge any price they...

  • Some people say that if there is a monopoly producer they can charge any price they want and the buyers have no choice but to buy the product at that price. Explain if that is true by considering a monopoly airline.

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Answer #1

This statement is not true

There is a certain demand function which indicates the maximum and minimum willingness to pay for a particular good or service. If there is a Monopoly in the market then the maximum it can charge is determined by the maximum willingness to pay. it can not demand any price from the consumer because otherwise consumer will not purchase at all. Consumer feel the force of making a purchase only to the extent of their maximum willingness to pay. Beyond that they are not supposed to buy it.

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