Answer to Question #75583 in Economics of Enterprise for Junior

Question

Lonewolf Ltd is the sole manufacturer and supplier of solar panels in the country. As a result of this the CEO claimed in a recent meeting that he can set any price he wishes and sell as many units of his product as he wants at that price

Answer 1

It is not correct. As we know, Lonewolf Ltd is the sole manufacturer and supplier of solar panels in the country. It means that the market of solar panels in the country is monopolistic. So the CEO really can set any price, but at the same time the quantity of units sold at a certain price level is still determined by the demand curve. The demand is elastic as solar panels are not the goods of basic commodity. Thus the demand decreases with the increase in price in this situation and Lonewolf Ltd will not be able to sell as many units of their product as they want at any price.