Business, 28.07.2021 01:50 ben3898

A firm that can effectively price discriminate will charge a higher price to Group of answer choices customers who have the more inelastic demand for the product. buyers who belong to the largest market segment. customers who have the more elastic demand for the product. buyers who are members of the smallest market segment.

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Answer from: kevin1015wangoudf1t

customers who have the more inelastic demand for the product.

Explanation:

Price discrimination is when the same product is sold at different prices to customers in different markets

types of price discrimination

1. first degree price discrimination : here sellers charge each consumer at their willingness to pay in order to eliminate consumer surplus.

2. second degree price discrimination : here firms offer different prices depending on the quantity purchased. e.g. giving discounts for bulk purchases.

3, third degree price discrimination : firms charge different prices to different groups of customers. e.g. having a certain price for senior citizens, students

Requirements to practice successful price discrimination

1.The firm must have market power. If the firm does not have market power and attempts to price discriminate they would lose customers

2.The firm must have different elasticities of demand for their product in different markets

3.The firm must be able to segment the market for their products

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

Price elasticity of demand = midpoint change in quantity demanded / midpoint change in price

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

If a firm charges the higher price in the market where customers have a more inelastic demand, the fall in quantity demanded would be less than the increase in price. As a result, total revenue would increase

If on the other hand, the higher price is charged in the market with the more elastic demand, the fall in quantity demanded would exceed the price increase. As a result, total revenue would fall.

Answer from: Quest

The law of supply and demand

Answer from: Quest

answer; sprint;

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