Final Answer:
In the price discrimination model, the group with the relatively flat demand curve C. has a relatively inelastic demand, indicating that consumers in this group are less responsive to changes in price, making it conducive for higher pricing in a price discrimination model.
Step-by-step explanation:
Price discrimination is a pricing strategy where a firm charges different prices to different groups of customers for the same good or service. In this context, the group with a relatively flat demand curve is likely to have a more inelastic demand. Elasticity of demand measures the responsiveness of quantity demanded to a change in price. A flatter demand curve indicates a lower elasticity, meaning that consumers in this group are less responsive to changes in price.
To understand this, consider the formula for elasticity (ε), where elasticity is calculated as the percentage change in quantity demanded divided by the percentage change in price (ε = (%ΔQ) / (%ΔP)). When the demand curve is flatter, the percentage change in price has a smaller impact on the percentage change in quantity demanded, resulting in a lower elasticity value. In the context of price discrimination, firms often charge higher prices to groups with less elastic (flatter) demand curves because consumers in these groups are less sensitive to price changes, allowing the firm to maximize revenue.
In summary, the correct answer is C. The group with the relatively flat demand curve has a relatively inelastic demand, making it suitable for a higher price point in a price discrimination model.