The economics of skyscrapers
residential use, the developers are more likely to charge more for business use than for residential in order to maximize profits. 193
It could be argued that a social good created as a result of these d volume of output than would occur in the non excess capacity in the monopolist’s undertaking and brings him nearer to the optimum position at which a competitive industry works. The discriminating monopolist now has the problem of equating the marginal cost of his entire output with a marginal revenue made up of two parts: the marginal revenue to be earned from the consumers in the normal market (called Market I in Figure from the privileged customers (Market 2 in Figure 2). Of course, there could be several such privileged customers. The results are shown in Figure 2. iscriminating policies is a larger -discriminating monopolist model, which reduces the 2), and the marginal revenue to be earned
194
Figure 2 - The output of a Monopolist when discrimination is possible
• The construction firm expands output until marginal cost equ
als marginal revenue.
• That level of cost is carried over into Markets 1 and 11, and in each case cuts the marginal revenue lines 1 and 2 at points which indicate outputs of Q1 and Q2.
• As a result OQ1 of the output will sold at price P1, whilst output OQ2 w OP2. The sum of OQ1 + OQ2 > OQ thereby ensuring a higher output.
ill be sold at a price of
• The firm is making supernormal profits in each case, but more in Market I than in Market 2. The discrimination in favour of the market where demand is more elastic d ability to keep the two markets separate. However, price discrimination is seen to be inefficient because it takes sales away from customers who are willing to pay a lot more and you give them to customers who are willing to pay less. But to be realistic, it is unlikely that the company will have the perfect information about its customers to be able to make such efficient sales. The company would have to know what every possible customers are thinking and find out how badly he/she wanted the the moment this is not plausible but in the future with the increasing development of search engines and social networking sites, personal preferences are catalogued and saved, price discrimination would reach its peak. product, you may need a supercomputer. At epends upon the
193 The different floor use could be found in the Appendix 1.1 194 Diagram from the book Economics Made Simple from by Whitehead, G. Page 177
90
Made with FlippingBook - Online Brochure Maker