Answer to Question #75588 in Microeconomics for njabulo magagula

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. Is this correct? Motivate your answer.

Answer 1

CEO of Lonewolf is mistaken, since the quantity of units sold at a certain price is still determined by the demand curve, which has a downward character. At the same time, solar panels are not a basic commodity, so the demand for them will be elastic, i.e. with an increase in the price, the quantity of units sold will decrease to a greater extent, and the total revenue will fall.