Chapter 63, Problem 2CYU

a)

To determine

The case of price discrimination.

Answer to Problem 2CYU

Not a case of price discrimination.

Explanation of Solution

Damaged merchandise is marked is not the case of price discrimination because all customer value the damaged merchandise less than the undamaged merchandise irrespective of elasticity of demand.

Economics Concept Introduction

When monopolists sell the same good to a different customer for a different price then it is called price discrimination. A low price is charged in case of a high price elasticity of demand and a high price is charged in case of a low-price elasticity of demand.

b)

To determine

The case of price discrimination.

Answer to Problem 2CYU

A case of price discrimination and consumers with a high price elasticity of demand.

Explanation of Solution

Hotels have senior citizen discounts is a case of price discrimination and consumer with high price elasticity of demand because a low price is charged from a group that is senior citizen group for the same service and if they are not charged a low price they do not come since their attendance is very less in hotels.

Economics Concept Introduction

When monopolists sell the same good to a different customer for different prices then it is called price discrimination. A low price is charged in case of a high price elasticity of demand and a high price is charged in case of a low-price elasticity of demand.

c)

To determine

The case of price discrimination.

Answer to Problem 2CYU

Food manufacturers placing discount coupons for their merchandise in the newspaper is a case of price discrimination and a discount coupon is distributed to the consumer with high price elasticity of demand.

Explanation of Solution

Food manufacturer placing discount coupon for their merchandise in the newspaper is a case of price discrimination discount coupon is distributed to the consumer with high price elasticity of demand because monopolist charge lower price with discount coupon and these coupons are used by those who cannot afford the real price and after getting the discount coupon, they will demand the goods.

Economics Concept Introduction

Price discrimination monopolist charges a different price for the same good from a different group of consumers according to the willingness to pay of customers. In a price-discriminating monopoly, the firm charges a different price in a different market with respect to the elasticity of demand.

d)

To determine

The case of price discrimination.

Answer to Problem 2CYU

Airline tickets cost more during the summer peak flying period is a case of price discrimination and consumers with a low-price elasticity of demand.

Explanation of Solution

Airline tickets cost more during the summer peak flying period is a case of price discrimination and consumers with a low-price elasticity of demand because monopolist charges a different price in different season. During the non-peak season, the consumer’s price elasticity of demand is high and during the peak season, the consumer price elasticity of demand is low because the consumer is ready to pay the high price during the peak season.

Economics Concept Introduction

When monopolists sell the same good to a different customer for a different price then it is called price discrimination. A low price is charged during non-peak season and a high price is charged during peak season.