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Home > Business & Careers > Economics   »   Monopolies and price-elasticity

 
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Old Feb 7, 2007, 02:17 AM
My-Brain-Is-Full
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Monopolies and price-elasticity

I'm confused by what I read in a text book about monopolies that seems to be a contradiction:

The monopolist has reduced output in order to push up price-

i) The price charged is always in the upperhalf (the price-elastic part) of the demand curve.

ii)The fewer subtitutes avaliable, the less choice there is for the consumer, the steeper (less price-elastic) the demand curve, the greater the price that can be charged.

What I don't understand is the price-elasticity part. I understand that if the producer produces on the elastic part of the demand curve then, at it's restricted output, a drop in price will see a boost in demand.
What confuses me is the second bit i.e what does a steeper, less-price elastic demand curve have to do with it? Doesn't that contradict the first part about producing on the elastic-part of the curve. If it doesn't then why bother produce on the elastic part?

Thanks

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