Consider a monopoly firm. This firm faces two seperate consumer groups and engages in price discrimination, i.e. charges different prices to these two groups. An economist claims that the monopoly can charge a higher price to the group with a lower own price elasticity of demand. Why does the economist think that? Explain this economist's reasoning. (Hint: You may want to refer to the rule of thumb for pricing (mark-up pricing) to answer this question.)

Consider a monopoly firm. This firm faces two seperate consumer groups and engages in price discrimination, i.e. charges different prices to these two groups. An economist claims that the monopoly can charge a higher price to the group with a lower own price elasticity of demand. Why does the economist think that? Explain this economist's reasoning. (Hint: You may want to refer to the rule of thumb for pricing (mark-up pricing) to answer this question.)

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQP

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