price discrimination: first, second and third degree

Question 1

price discrimiantion

Answer 1

-when a firm charges different prices to different consumers for an identical good service with no differences in cost of prod

Question 2

conditions for price discrimination

Answer 2

-price makers
-info to separate market
-prevent re-sale

Question 3

first degree and graph

Answer 3

-when consumers charged the exact price they are willing and able to buy
-consumer surplus turned into monopoly profit

Question 4

second degree price discrimination

Answer 4

-last minute lower prices and fill capacity to cover fixed costs
-airplane, cinema
-graph:MC vertical, and horizontal, revenue normal, produce at MC=MR, excess capacity (qcap)
-lower prices to where AR=Q cap
-gain in consumer surplus for those who pay lower price

Question 5

third degree price discrimination

Answer 5

-segment market into different price elasticities of demand and charge different prices for different goods
-graph: price elastic and inelastic
-MC=horizontal all across
-demand steeper (MR, AR) for inelastic
-MC=MR shows diff prices

Question 6

pros and cons of price discrimination

Answer 6

-allocative inefficiency
-inequalities: lower incomes
-anti-comp nature- 3rd degree, lower prices deriving out

pros
-dynamic efficiency
-economies of scale
-some consumers benefit
-cross subsidisation: loss making goods or services