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Price discrimination
Question | Answer |
---|---|
Define price discrimination | When goods and services are sold to different consumers at varying ratios between marginal cost and price |
What 6 conditions are necessary for price discrimination? | Monopoly power. Separation of markets. Differentiation of consumers of different PEDs. Consumer ignorance. Consumer apathy. Consumer attitude. |
Types of price discrimination | First degree. Second degree. Third degree. |
Define first degree price discrimination | Consumer surplus is eliminated. Maximum price is charged. |
Define second degree price discrimination | Price reduction due to bulk buying |
Define third degree price discrimination | Division of markets based on consumer characteristics |