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Necessary conditions for the practice of price discrimination
- Describe price discrimination as the practice of charging different prices to different consumer groups for the same product, where the price difference is not justified by differences in cost - see page 1 of the document '1.5. Price Discrimination'
- Complete Q1 on page 5 of the document '1.5. Price Discrimination
- Explain that price discrimination may only take place if all of the following conditions exist: the firm must possess some degree of market power; there must be groups of consumers with differing price elasticities of demand for the product; the firm must be able to separate groups to ensure that no resale of the product occurs - see page 2 of the document '1.5. Price Discrimination'
- Complete Q2 see page 5 of the document '1.5. Price Discrimination'
- Draw a diagram to illustrate how a firm maximises profit in third degree price discrimination, explaining why the higher price is set in the market with the relatively more inelastic demand - see pages 3-4 of the document '1.5. Price Discrimination'
- Complete Qs 3 to 4 on pages 5-6 of the document '1.5. Price Discrimination'
- Complete Q5 on page 6 of the document '1.5. Price Discrimination'
- Can price discrimination be beneficial to society?
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