Challenges that a price maker has to overcome for effective price discrimination .

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 11, Problem 1QR

To determine

Challenges that a price maker has to overcome for effective price discrimination.

Expert Solution & Answer

Explanation of Solution

Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.

First, the firm has to differentiate the group of consumers with different elasticities of demand. The firm will charge a higher price when the price elasticity is inelastic. This is because there will be a little responsiveness or the change in quantity demanded due to high change in price. If the price elasticity of demand is elastic, it means high responsiveness or if the change in quantity demanded is due to the small change in price, the firm will charge a relatively lower price.

Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.

Economics Concept Introduction

Price discrimination: Price discrimination is the practice of charging different prices for the same commodity for different consumers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

What 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?

using relevant examples distinguish among the three forms of price discrimination.

Explain the first degree of the price discrimination in the economy?

Answer 2

Question

Chapter 11, Problem 1QR

To determine

Challenges that a price maker has to overcome for effective price discrimination.

Expert Solution & Answer

Explanation of Solution

Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.

First, the firm has to differentiate the group of consumers with different elasticities of demand. The firm will charge a higher price when the price elasticity is inelastic. This is because there will be a little responsiveness or the change in quantity demanded due to high change in price. If the price elasticity of demand is elastic, it means high responsiveness or if the change in quantity demanded is due to the small change in price, the firm will charge a relatively lower price.

Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.

Economics Concept Introduction

Price discrimination: Price discrimination is the practice of charging different prices for the same commodity for different consumers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 11, Problem 1QR

To determine

Challenges that a price maker has to overcome for effective price discrimination.

Expert Solution & Answer

Explanation of Solution

Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.

First, the firm has to differentiate the group of consumers with different elasticities of demand. The firm will charge a higher price when the price elasticity is inelastic. This is because there will be a little responsiveness or the change in quantity demanded due to high change in price. If the price elasticity of demand is elastic, it means high responsiveness or if the change in quantity demanded is due to the small change in price, the firm will charge a relatively lower price.

Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.

Economics Concept Introduction

Price discrimination: Price discrimination is the practice of charging different prices for the same commodity for different consumers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 11, Problem 1QR

To determine

Challenges that a price maker has to overcome for effective price discrimination.

Expert Solution & Answer

Explanation of Solution

Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.

First, the firm has to differentiate the group of consumers with different elasticities of demand. The firm will charge a higher price when the price elasticity is inelastic. This is because there will be a little responsiveness or the change in quantity demanded due to high change in price. If the price elasticity of demand is elastic, it means high responsiveness or if the change in quantity demanded is due to the small change in price, the firm will charge a relatively lower price.

Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.

Economics Concept Introduction

Price discrimination: Price discrimination is the practice of charging different prices for the same commodity for different consumers.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1QR

To determine

Challenges that a price maker has to overcome for effective price discrimination.

Expert Solution & Answer

Explanation of Solution

Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.

First, the firm has to differentiate the group of consumers with different elasticities of demand. The firm will charge a higher price when the price elasticity is inelastic. This is because there will be a little responsiveness or the change in quantity demanded due to high change in price. If the price elasticity of demand is elastic, it means high responsiveness or if the change in quantity demanded is due to the small change in price, the firm will charge a relatively lower price.

Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.

Economics Concept Introduction

Price discrimination: Price discrimination is the practice of charging different prices for the same commodity for different consumers.

Answer 6

Chapter 11, Problem 1QR

To determine

Challenges that a price maker has to overcome for effective price discrimination.

Expert Solution & Answer

Explanation of Solution

Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.

First, the firm has to differentiate the group of consumers with different elasticities of demand. The firm will charge a higher price when the price elasticity is inelastic. This is because there will be a little responsiveness or the change in quantity demanded due to high change in price. If the price elasticity of demand is elastic, it means high responsiveness or if the change in quantity demanded is due to the small change in price, the firm will charge a relatively lower price.

Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.

Economics Concept Introduction

Price discrimination: Price discrimination is the practice of charging different prices for the same commodity for different consumers.

Answer 7

Chapter 11, Problem 1QR

To determine

Challenges that a price maker has to overcome for effective price discrimination.

Answer 8

Expert Solution & Answer

Explanation of Solution

Price discrimination is the practice of charging different prices for the same commodity from different consumers. In order to set effective price discrimination, the price maker has to overcome certain challenges.

First, the firm has to differentiate the group of consumers with different elasticities of demand. The firm will charge a higher price when the price elasticity is inelastic. This is because there will be a little responsiveness or the change in quantity demanded due to high change in price. If the price elasticity of demand is elastic, it means high responsiveness or if the change in quantity demanded is due to the small change in price, the firm will charge a relatively lower price.

Second, the firms that engaged in price discrimination should need the ability to prevent arbitrage. This means that the firms have to prevent the activities like resale of the commodity to restrict money creation for those who are buying the commodity at a lower price.