Basic Types Of Price Discrimination Essay

And the customer are sensitive to the price since those products are using only few times and need to be change all the time.

Consumer behavior or elasticity is a consumer’s response to a change in price of a good or service. Consumer behavior allows a consumer to rank and prioritize purchases according to their elasticity of certain goods and their dependence on others (Managerial Economics, 2010). When consumers recognize a change in price and respond strongly, they can adjust their consumption and therefore have their demand for that item become elastic. Automobiles tend to have elasticity in them in regards to make, model, and features that the consumer is willing to pay for. Basic models and good fuel mileage become important as income goes down and elasticity for automobiles goes up. Merriam-Webster defines competition in business as "the effort of two or

Amazon can use 3rd degree price discrimination to divide customers into different groups and charge a different price to customers in different customers in different groups, but the same price to all consumers within the group. The firm will charge groups of customers prices relative to their demand elasticities. We can illustrate this on a graph:

market, there is price competition. This can lead to price wars and, therefore, lower prices for

If the product coast a large percentage of the average consumer’s income, people will pay more attention to sale prices because they may be afraid of a fact that if the price keeps rising, they can’t afford it because it is expensive and costs most of their income. It is common that we spend more than $200 on one pair of Nike shoes, which are quite expensive. However, the price of bread is low. Furthermore, one pair of Nike shoes costs more percentage of clients’ income than a piece of bread. If the price declines, people would like to buy more Nike shoes because they can’t afford it in normal time. However, people won’t buy too much bread than before because the bread may go rancid quickly. So people are more sensitive to the price of Nike shoes. As a consequence, all Nike shoes sold in Canada have more elasticity than all bread sold in Canada.

For example, If you are selling a product that is a normal good with a high rate of competition in the market, raising the price could have negative effects on overall profits because users will simply find another substitute somewhere. Charles stated that market separation may come into play when firms realize there are differing elasticity curves for different consumers of the same product. Firms can maximize profits by evaluating consumer segments within a single market. If the firm notices different demand elasticity for different segments it may opt to engage in price discrimination to maximize profits. Charles gave Microsoft Office as an example; the same software is offered to students, casual users and business users at different price

Price elasticity that relates to demand is determined by many factors. Price elasticity is measured by the change in price and the response from consumer demand. The demand of a good or service will vary the price in the item. The most important factor to determine the price elasticity of demand is necessity. If a good is a necessity, the demand will seldom change and the price is able to be adjusted. The demand is the most important due to the freedom it provides for price adjustment and inventory control. With necessity comes an inelastic price. Other factors such as the

(7) A monopolist can discriminate prices for his product, a firm working under perfect competition cannot. The monopolist will be increasing his total profit by price discrimination if he find? Elastic ties of demand are different in different markets.

In all three degrees of price discrimination firms are able to make more profit and eliminate any excess capacity they may have. Firms are able to do this by charging higher prices to those consumers with a more price inelastic demand for their product. The firm is reducing the welfare of these consumers by changing them at the maximum price they are willing to

Elasticity of demand is a variation in price depending on the demand of a good or service. Items like vehicles, appliances, jewelry, and electronics will sell less at full price than they do when there is a drop in price. When producers and retailers drop the price enough for the market to take notice, people react in deciding to purchase the good or service. This reaction and sensitivity to the market is known as Elastic demand.

The price ceiling is the maximum price a seller is allowed to charge for a product or service. An impact on society includes when the prices are so high of a product, that no one can buy it. A price floor is the lowest legal price a product or service can be sold at. When market price is at its lowest, it may still be too high for consumers to purchase products. Governments can intervene for any purpose, and they are the ones who set these price controls.

there are a number of different buyers and sellers in the marketplace. This means that we have competition in the market, which allows price to change in response to changes in supply and demand. Furthermore, for almost every product there are substitutes, so if one product becomes too expensive, a buyer can choose a cheaper substitute instead. In a market with many buyers and sellers, both the consumer and the supplier have equal ability to influence price.

Based on the above description, forms of elasticity will affect business decisions and pricing strategies differently depending on the nature and type of products or services being offered. Business organizations whose product offerings have elastic and perfectly elastic price elasticities of demand should not attempt to raise prices of their products because it will cause the quantity demanded and consequently total revenues to drop drastically. Businesses can there use the price elasticities of demand to determine whether the proposed changes in their prices will raise or reduce their total revenue. The following expression may be useful in helping business organizations to determine the impacts of elasticities on their total revenues based on the suggested price changes.

Price discrimination can be defined as when the same good or service is sold at different prices to different consumers. If we look at this definition of price discrimination, for an example, we can show that price discrimination can be seen in the entrance tickets of parks such as Universal studios; this is due to the fact that there are discounts for children and senior citizens. (Phlips L. , 1983) However, this can be seen as not being discriminative at all due to the fact that if the price difference full reflects the difference in the cost of carrying the good from the seller’s location to the buyers’ location.

Competition-based pricing is setting a price in comparison with competitors. Surely a firm has three options and these are to price lower, price to same or price higher. For example: Dove Damage Therapy Shampoo (700 ml) cost $11.70 versus Pantene Shampoo (700ml) cost $10.90 in FairPrice.