Price Discrimination-Monopoly

Question 1

3 conditions for price discrimination

Answer 1

Market power-must be able to change prices without losing out
Information of elasticities-must be aware consumers elasticities
Limit reselling-stop elastic consumers reselling to inelastic consumers

Question 2

What is the best outcome for price discrimination

Answer 2

Price discrimination earns more revenue than setting one price for all consumers.

Question 3

Pros cons of price discrimination (3,2)

Answer 3

Dynamic efficiency-SNP, can also cross subsidise
E.O.S
Some consumers benefit from cheaper prices
Reduces overcrowding

Allocative inefficiency
Inequalities