PRIN.OF ECON.ACCESS CODE
2nd Edition
ISBN: 9780393691757
Author: Mateer
Publisher: NORTON
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Question
Chapter 11, Problem 1QFR
To determine
Challenges overcome for effective
Expert Solution & Answer
Explanation of Solution
Before a price maker firm executes price discrimination policy effectively it must overcome 2 basic challenges: -
- Different price
elasticities of demand: For executing price discrimination policy effectively the price maker firm must be able to enjoy some or high degree ofmonopoly power and the same time different consumers must face different price elasticities of demand. E.g. people having low level of income will be more price elastic and sensible to price change while the business class travelers possess moreinelastic demand . - Separate markets: - The price maker firm must overcome the challenge of identifying and separating the market segments and prevent resale of good. E.g. to stop an adult people from using a kid's movie ticket. Preventing business travelers from purchasing discounted ticket.
Economics Concept Introduction
Introduction:
Price discrimination is the process of imposing different prices from different groups of people for different quantity or quality for the same good or service. The best example of price discrimination exercise is imposing differentiated prices for business class, first class and economy class travels in a same flight. Price discrimination can be exercised only when the firm or seller becomes price maker i.e. one which has partial or complete control over market price and the industry as a whole.
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Chapter 11 Solutions
PRIN.OF ECON.ACCESS CODE
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Similar questions
- why price discrimination is profitable in the perfume market or industry ?arrow_forwardList two things that first-order price discrimination and two-part tariff have in common.arrow_forwardWhat are the key conditions that must be present for a firm to successfully price discriminate? What are two different examples of price discrimination being practiced today?arrow_forward
- In terms of reality, could you show that it is easier for a firm to practice second-degree price discrimination than it is for a firm to practice first-degree price discrimination? If you can use a graph, that would help me understand thank you.arrow_forwardusing relevant examples distinguish among the three forms of price discrimination.arrow_forwardWhat motivate an attraction to apply price discriminations? Will they succeed in applying price discrimination even though they are NOT a monopolist? Discuss your answer with a specific example of an attraction applying price discrimination in Malaysia.arrow_forward
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- Tara loves to go through the Saturday paper and cut out supermarket coupons. How do you think Tara's coupon-clipping habits apply to the concept of price discrimination?arrow_forwardExplain the concept of black marketing as a direct consequence of price ceiling in economics?arrow_forwardIn which cases would an organization benefit from using direct and indirect price discrimination? Does market structure influence the capacity of the firm to use price discrimination?arrow_forward
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