Price Discrimination

Question 1

Define price discrimination

Answer 1

Charging prices to different customers for the same product or service all the prices based on different willingness to pay

Question 2

What are the conditions necessary for price discrimination?

Answer 2

Must be able to identify different groups of customers

Different customers must have different price elasticities of demand

Markets be able to prevent resale

Question 3

Methods of price discrimination

Answer 3

Geographical
Time
Age of customers
Quantity bought

Question 4

Define 1st° price discrimination

Answer 4

When discriminating phone can charge a separate price for each individual customer

Question 5

Define 2nd° price discrimination

Answer 5

Charging different prices for different quantities such as quantity discounts for bulk purchases

Question 6

Can there be consumer surplus in price discrimination

Answer 6

It depends, they can be in 2nd° price discrimination because you are buying in bulk

Question 7

Define 3rd° price discrimination

Answer 7

When discriminating from controllers have a price for different groups of customers

Question 8

What are advantages of price discrimination?

Answer 8

Profit maximises prices match characteristics of the market
Equitable
Lower price for some consumers
Increased sales leads to an increase in economies of scale

Question 9

What are the disadvantages of price discrimination?

Answer 9

Loss in consumer surplus
Unequal
May be costly to implement