Business, 16.05.2020 04:57 Kaytlynshue2443

Price Discrimination is when a firm charges different prices for an identical good to different groups of customers. It is a simple application of "mark up" pricing under certain conditions. The conditions for price discrimination are: 1. Customers cannot re-sell the product 2. Customers can be identified by their elasticity 3. Firm has pricing power. For example, a university charges two different prices for the same education depending on whether a student is in-state or out of state. Airlines charge different prices for the same flight. Bars have "happy hours" were they charge a lower price for beer between 5:00 and 7:00 than they do later in the evening. These prices are all based on markup. A firm identifies which group has a relatively inelastic demand (or the least elastic) and charges them a higher price. For example, suppose the marginal cost of providing education is $460 per student (regardless of where the student is from). However a student from out-of-state pays $10000 whereas the in-state student pays $5000. Question 1 What is the price elasticity of demand of out-of-state students (absolute value)

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Price Discrimination is when a firm charges different prices for an identical good to different grou...

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