price discrimination

Question 1

What is price discrimination

Answer 1

refers to when firms charge different prices for the same good to different consumers

Question 2

first degree discrimination

Answer 2

refers to when consumers are charged the maximum price for a goof

Question 3

2nd degree price discrimination

Answer 3

Refers to when consumers are charged based on how much of the good they consume common with energy saving companies

Question 4

3rd degree price discrimination

Answer 4

Refers to when consumers are separated into different segments - eg student discount

Question 5

Conditions for price discrimination

Answer 5

• firm should be a monopoly or oligopoly - price makers
• firms must be able to separate the market into different sections
• cost of separating market should be less than revenue generated
• requires low or constant marginal cost

Question 6

Advantages

Answer 6

• Higher revenue generated for the firms
• lower prices for consumers on low income
• Research and development

Question 7

Disadvantages

Answer 7

• Higher prices - leads to loss of consumer surplus
• inequality
• Administration costs - involved in separating the market