Question

Conditions for price discrimination Price discrimination is the practice of selling the same good at more than one price when the price differences are not justified by cost differences. Evaluate the following statement: "Price discrimination is possible only if no one can easily resell the good." A. True, because this prevents the low-price segment of the market from reselling to the high-price segment B. False, because it doesn't matter whether consumers can resell the good or not C. False, because allowing for resale is more efficient D. None of these choices

Answer 1

The correct answer is option A.

Step-by-step explanation:

Price discrimination refers to the market practice of charging different prices from different customers for the same good. Generally, the different price is charged from customers with different price elasticities of demand.

Price discrimination is of three types

• First degree Price discrimination
• Second degree Price discrimination
• Third-degree Price discrimination

There are some necessary conditions required for price discrimination to be possible. The firm must be operating in an imperfect market such that it is a price maker and not a price taker.

The seller should be able to identify customers or groups according to their price elasticity. The higher price is charged from customers with low price elasticity.

The market with high and low prices should be separated such that resale is not possible. Otherwise, the customers in the low price segment of the market will sell goods to customers in a high price segment at a lower price than the seller and earn the profit.