Essay Reducing Inequalities: Price discrimination is also beneficial to society for it helps in reducing inequalities of personal incomes when higher prices or fees are charged to the rich than to the poor. Growth of monopoly is linked with the satisfaction of the employees.
Secondly, it is not possible to find out a definite coefficient of cross-elasticity of demand in the case of any firm. Behaviour of Monopoly: How the monopoly behaves, is another factor which decides about its growth.
Customers do not move readily from one market to the other because of ignorance or inertia. Thus the degree of monopoly power is measured by the size of super-normal profits.
Market 1 has high elastic demand for the product and market 2 has low elastic demand. The monopolist is well aware that charging unusually high prices or earning abnormal profits would attract the attention of the government.
The provision of essential commodities or services by single public utilities may ensure high quality or convenience in the market to suit the needs of all consumers. Most of them might have conflicting interests.
Economic Welfare: Price discrimination is justified if it helps in promoting economic welfare. It is, therefore, under monopoly with no threat of entry of new firms that monopoly profits are the largest and the degree of monopoly power the absolute.
Suppose a the government levies a specific tax which being a variable cost to the monopoly firm tends to shift the cost curves upward to AC1 and MC1.