Question

What is the term used to refer to charging different prices to different buyers of a specific product?

a) Price diversity
b) Discrimination
c) Equality pricing
d) Market variance

Answer 1

Price discrimination is the practice of charging different prices to different buyers for the same product, often seen in monopolistically competitive markets. Market forces can incentivize businesses to act in a less discriminatory fashion to maximize revenue, attract a larger workforce, and maintain efficiency and legal compliance.

Step-by-step explanation:

The term used to refer to charging different prices to different buyers of the same product is known as price discrimination. This involves setting different prices for the same product based not on differences in costs but on variations in the willingness to pay between different groups of consumers. The concept of differentiated products contributes to monopolistic competition in the market. Businesses in monopolistic competitive markets have an incentive to engage in price discrimination to maximize their profits by capturing consumer surplus.

With respect to market forces acting against discriminatory practices, businesses may be encouraged by the market to change their discriminatory behaviors for economic reasons. For instance, a local flower delivery business that is biased but realizes its customer base is largely comprised of a group it is biased against might lose substantial revenue if prejudices affect service quality or customer relations. Similarly, an assembly line needing workers may have to reconsider gender biases to attract a larger pool of qualified candidates, and a home healthcare service that discriminates in wages may face legal actions, poor morale, and efficiency losses, pressuring it to change its wage policies.

Answer 2

The practice of charging different prices to different buyers for the same product is known as price discrimination. It is associated with product differentiation and appears more in monopolistic competition than in perfectly competitive markets.

Step-by-step explanation:

The term applied to the practice of charging different prices to different buyers for the same product is known as price discrimination. This strategy is often observed in markets where the same product or service is sold at varying prices to consumers, based on factors like location, buyer's willingness to pay, the time of purchase, and more. Product differentiation and monopolistic competition, where a variety of styles, flavors, and other characteristics distinguish products from one another, can lead to situations where price discrimination is more feasible for businesses.

For instance, a business might charge higher prices in a wealthy neighborhood than in a middle-income area due to the different perceived demand and willingness to pay. In monopolistic competition, firms have some degree of market power due to this product differentiation, which enables them to engage in price discrimination more easily compared to perfectly competitive markets where products are largely the same and competition on pricing is fiercer.