Asked by Savannah Calkins on May 10, 2024
Verified
If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge
A) a higher price to the buyers whose demand is elastic.
B) a higher price to the buyers whose demand is inelastic.
C) a higher price to the buyers whose demand is unit-elastic.
D) the same price, actually, because price-discrimination will result in lower revenues.
Price-Discriminate
Price discrimination refers to the strategy where a company sells the same product to different customers at different prices based on factors such as willingness to pay, market segment, or geographic location.
Elastic Demand
A situation where the quantity demanded of a good or service significantly changes in response to a change in its price, indicating a high price sensitivity.
Inelastic Demand
Refers to a situation where the demand for a product is relatively unresponsive to changes in price.
- Recognize the implications of elasticity on pricing and revenue.
- Evaluate the effects of price discrimination based on elasticity of demand.
Verified Answer
NS
NiMrAt SiNgHMay 15, 2024
Final Answer :
B
Explanation :
Sellers would charge a higher price to buyers whose demand is inelastic because those buyers are less sensitive to price changes and are more likely to continue purchasing the product despite the higher price, thus increasing the seller's revenues.
Learning Objectives
- Recognize the implications of elasticity on pricing and revenue.
- Evaluate the effects of price discrimination based on elasticity of demand.