Price Discrimination

Question 1

What is price discrimination?

Answer 1

This is when a firm charges different prices to different groups of the customers for same product. Train travel.

Question 2

First degree

Answer 2

This involves charging consumer the maximum price that they are willing to pay tends to be small businesses

Question 3

Second degree

Answer 3

This involves charging different prices depending upon the quantity consumed. Doritos 1 dorito for £1.50 2 doritos for £2

Question 4

Third degree

Answer 4

Different prices to different groups of people. Student discounts.

Question 5

Price discrimination characteristics:

Answer 5

-Abilities to set price. Some market power
-Ability to segment different classes of consumers
-Ability to prevent resale
-Different groups must have different PeDs

Question 6

What is Price discrimination based on

Answer 6

Income
Time
Place

Question 7

Evaluation on price discrimination firms

Answer 7

Profit maximisation
Economies of scale
Efficient use infrastructure
Survival

Question 8

Evaluation on price discrimination consumers

Answer 8

Possible lower prices
Flexibility

Question 9

Disadvantages of price discrimination

Answer 9

Explotation of captive markets

Question 10

What is consumer surplus?

Answer 10

This is the difference between the total amount that consumers are willing and able to pay for a good or service (indicated by the demand curve) and the total amount that they actual

Question 11

What is producer surplus

Answer 11

This is the difference between the price at which producers are willing and able to supply a good for and the price they actually receive.

Question 12

Why do businesses use price discrimination?

Answer 12

To turn consumer surplus into producer surplus - turn over higher revenue and profits