Figure 9.7 Gains from Market Power under Different Demand Curves
(a) When buyers are not very price-sensitive, the demand curve is steep. At MR1 = MC, the producer supplies quantity Qm at the relatively high price P1, and generates the relatively large producer surplus PS1.(b) When buyers are price-sensitive, the demand curve is flat. At MR2 = MC, the producer also supplies quantity Qm, but at the relatively low price P2, and generates the relatively small producer surplus PS2.