Microeconomics price discrimination

Students are expected to complete the course of study set forth in the syllabus to properly prepare for the final examination. As noted information about where a person lives postal codeshow the person dresses, what kind of car he or she drives, occupation, and income and spending patterns can be helpful in classifying.

Regulation of this type has not been limited to natural monopolies. Thus, firms in perfectly competitive markets will not engage in price discrimination. In many cases, where the product is marketed to make an attractive gift, the gender of the purchaser may be different from that of the end user.

The demand Microeconomics price discrimination air travel by senior citizens is likely to be more elastic than it is for other passengers, especially business travelers, since the purpose of their travel is largely discretionary often touristic in nature and since their time is likely to be less costly, making them more willing to seek out information on travel alternatives than the rest of the population.

However, the PPC does not shift when resources are left unused or when they are not used efficiently. Each of them cannot be taken separately as if they are, they will not be as determinative as they are when they are combined together.

As we want more houses, the number of computer programs we would have to sacrifice per house would increase from. How a society chooses to answer these questions will in a large part determine the prosperity of the society, its distribution of wealth, and the variety of products and services available.

Generating positive externalities We can extend the analysis to consider the role of price discrimination in reducing market failuresuch as enabling wider consumption of merit goods. If a foreign country can supply us with a commodity cheaper than we can make it, better buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage.

The difficulty of determining who gets a product is often lost on the casual observer of centrally planned economies — but this is one of the most difficult decisions that has to be made — who will go without.

In the example of coffee, a restaurant may gain more economic profit by making poor quality regular coffee—more profit is gained from up-selling to premium customers than is lost from customers who refuse to purchase inexpensive but poor quality coffee.

Diagram for price discrimination If we assume marginal cost MC is constant across all markets, whether or not the market is divided, it will equal average total cost ATC. Gender-based price discrimination in the United States Gender-based price discrimination is the practice of offering identical or similar services and products to men and women at different prices when the cost of producing the products and services is the same.

Oligopolies are price setters rather than price takers. For simplicity, we will assume that labor and capital are substitutes in production, meaning that there is not a certain amount of labor required to operate the capital.

However, the widespread use of dynamic pricing models by online sellers means that time-based pricing in increasingly common. Alternatively, unions seek to restrict the supply of labor to increase wages by lobbying for laws that restrict that age a person is eligible to work or the number of hours they are allowed to work.

Likely those individuals who are good at programming and not very good at building houses. Government regulation generally consists of regulatory commissions charged with the principal duty of setting prices.

Terms of Trade For trade to take place, each individual must benefit. As new technologies are developed, firms have an incentive to adopt the technologies if doing so will allow them to produce at a lower cost.

Airlines accomplish this by imposing advance ticketing requirements or minimum stay requirements — conditions that would be difficult for average business traveler to meet.

Second degree Second-degree price discrimination means charging a different price for different quantities, such as quantity discounts for bulk purchases. This prediction has come true, as vast numbers of business travelers are buying airfares only in economy class for business travel.

Oligopolies have perfect knowledge of their own cost and demand functions but their inter-firm information may be incomplete. The firm must be able to identify different market segments, such as domestic users and industrial users.

Since marginal revenue is less than price, the demand for the resources will decline faster as the price of the input increases.

These include discount coupons, rebates, bulk and quantity pricing, seasonal discounts, and frequent buyer discounts. Such students are likely to have more choices of where to attend college.

They have options, of course, but the range of options is likely to be more limited than the range of options facing tourists.

Price discrimination

The restrictions or "fences" help ensure that market segments buy in the booking class range that has been established for them. Examples of price discrimination[ edit ] Retail price discrimination[ edit ] Manufacturers may sell their products to similarly situated retailers at different prices based solely on the volume of products purchased.

Unsourced material may be challenged and removed. The United Order As members of the Church, we recognize that there will some day be an economic system in place that will be uniquely different from the current economic systems of today.

Price Discrimination

Under capitalism, businesses have an incentive to always produce in the least cost manner. Because tourist demand is relatively price elastic, relatively small reductions in price will attract relatively large numbers of additional tourists.

If a company has a dominant position, then there is a special responsibility not to allow its conduct to impair competition on the common market however these will all falls away if it is not dominant.

Not every instance of firms charging different prices to different customers constitutes price discrimination. In all these cases a firm charges different prices to different customers for what is essentially the same product. A natural monopoly suffers from the same inefficiencies as any other monopoly.

Highest and lowest rates at which the goods would trade for are determined by each individual's marginal opportunity cost.

Economic profit vs. accounting profit. Average total cost (ATC) and marginal cost (MC). Marginal product of labor (MPL). Price discrimination.

Pure competition, implicit costs, explicit costs. etc. Learn with flashcards, games, and more — for free. Price discrimination. Price discrimination is the practice of charging a different price for the same good or service.

There are three types of price discrimination – first-degree, second-degree, and third-degree price discrimination. Price discrimination happens when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs of supply.

What are the main aims of price discrimination? What is the difference between price discrimination and product. A monopoly (from Greek μόνος mónos ["alone" or "single"] and πωλεῖν pōleîn ["to sell"]) exists when a specific person or enterprise is the only supplier of a particular commodity.

This contrasts with a monopsony which relates to a single entity's control of a market to purchase a good or service, and with oligopoly which consists of a few sellers dominating a market.

Price Discrimination

Price discrimination happens when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs of supply.

What are the main aims of price discrimination? What is the difference between price discrimination and product.

Microeconomics price discrimination
Rated 0/5 based on 59 review
ECON Microeconomics