DEMAND SHIFTS IN MONOPOLY MARKETS

Abstract

This paper introduces two exercises on shifts in simple non-linear demands within a monopoly market. These exercises aim to address a common misconception among undergraduate economics students: the mistaken belief that the comparative static effects of shifts in demand in monopoly and perfect competition are qualitatively identical. To illustrate that these comparative static results may diverge, we present examples in which an increase in demand—a shift to the right in the demand curve—leads to a higher price in a competitive market but results in a lower price in a monopoly market. Additionally, these exercises reinforce fundamental concepts such as marginal reasoning, profit calculation, and the significance of demand level and elasticity in monopoly pricing. Furthermore, they underscore the role of assumptions in economics. Our activities are tailored for undergraduate students enrolled in principles and intermediate-level economics, microeconomics, and industrial organization courses.