Chapter 11R, Problem 24MCQ

To determine

The correct option for given situation where price discrimination is possible by the firm.

Answer to Problem 24MCQ

Option b is correct answer.

Explanation of Solution

Explanation for correct option:

b.

Price discrimination can be done for customers that are of different age group. For instance, senior citizens get some extra benefits while booking flight tickets. Children can get student discount on flight bookings too. Therefore, option b is incorrect.

Explanation for incorrect options:

a.

Price discrimination can be done by the firm that has customers with different age groups or different income level. It is based on the type of customers they have. Therefore, option a is incorrect.

c.

Customers with same price elasticity of demand cannot be charged with different prices for same products as they will shift towards cheaper substitute available in the market. Therefore, option c is incorrect.

d.

Price discrimination can be done for people with different income level by selling premium or standard products but not same products. Therefore, option d is incorrect.

e.

Customers whose locality is different cannot be charged with different prices for same product as it will affect company’s goodwill. Therefore, option e is incorrect.

Economics Concept Introduction

Price Discrimination: Price discrimination refers to the prices at which different prices for same products are charged to different people. For instance, prices of movie tickets are different for children or senior citizens.