Price discrimination occurs when a firm sells the same product in two or more markets at different prices. In other words consumers pay different prices for the same goods.
To price discriminate the following conditions need to exist:
• the firm must have some market power, not be a price taker
• the firm must be able to separate the markets
• buyers in different markets must have a different elasticity of demand
• firms must be able to prevent reselling by those buyers who paid the low price to those who would pay the higher price
If these conditions exist, firms can charge those with less elastic demand higher prices and therefore gain higher levels of revenue. If the increased revenue from price discrimination is greater than the addition to cost then the firm will gain higher levels of profit
marlinbito answered the question on July 5, 2018 at 15:11
-
Explain why the cost of supplying a litre of tap water is likely to be lower than the cost of supplying a litre of bottled...
(Solved)
Explain why the cost of supplying a litre of tap water is likely to be lower than the cost of supplying a litre of bottled water
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the impact of increasing competition in the markets for electricity and gas.
(Solved)
Critically examine the impact of increasing competition in the markets for electricity and gas.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain the difference between natural and artificial barriers to entry.
(Solved)
Explain the difference between natural and artificial barriers to entry.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain the difference between unemployment and economic inactivity.
(Solved)
Explain the difference between unemployment and economic inactivity.
Date posted:
July 5, 2018
.
Answers (1)
-
Evaluate the view that GDP statistics should not be used as an indicator of economic welfare
(Solved)
Evaluate the view that GDP statistics should not be used as an indicator of economic welfare
Date posted:
July 5, 2018
.
Answers (1)
-
Explain the main factors which determine an economy’s rate of economic growth
(Solved)
Explain the main factors which determine an economy’s rate of economic growth
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that fiscal policy is the most effective means of controlling aggregate demand.
(Solved)
Critically examine the view that fiscal policy is the most effective means of controlling aggregate demand.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain what is meant by price elasticity of supply
(Solved)
Explain what is meant by price elasticity of supply
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that government intervention to correct market failure is likely to make matters worse.
(Solved)
Critically examine the view that government intervention to correct market failure is likely to make matters worse.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain why the free market would fail to provide sufficient public goods.
(Solved)
Explain why the free market would fail to provide sufficient public goods.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain what is meant by the term market failure.
(Solved)
Explain what is meant by the term market failure.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain some of the factors which could cause a rightward shift in a country’s production possibility curve.
(Solved)
Explain some of the factors which could cause a rightward shift in a country’s production possibility curve.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain what is shown by a production possibility curve (frontier).
(Solved)
Explain what is shown by a production possibility curve (frontier).
Date posted:
July 5, 2018
.
Answers (1)
-
Evaluate the view that current account deficits are still economically significant.
(Solved)
Evaluate the view that current account deficits are still economically significant.
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that free trade alone is insufficient to promote economic development.
(Solved)
Critically examine the view that free trade alone is insufficient to promote economic development.
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that government “green” policies benefit neither businesses nor the environment.
(Solved)
Critically examine the view that government “green” policies benefit neither businesses nor the environment.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain some of the ways in which businesses may use and misuse the environment.
(Solved)
Explain some of the ways in which businesses may use and misuse the environment.
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that firms can continue to grow without experiencing diseconomies of scale.
(Solved)
Critically examine the view that firms can continue to grow without experiencing diseconomies of scale.
Date posted:
July 5, 2018
.
Answers (1)
-
Explain the relationship between a firm’s short run and long run average cost curves.
(Solved)
Explain the relationship between a firm’s short run and long run average cost curves.
Date posted:
July 5, 2018
.
Answers (1)
-
Critically examine the view that consumers benefit more from non-price competition than from price competition.
(Solved)
Critically examine the view that consumers benefit more from non-price competition than from price competition.
Date posted:
July 5, 2018
.
Answers (1)