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Harry Bindloss




PRICE DISCRIMINATION
Price discrimination: The charging of different prices in different markets where there are
different PED's

Price discrimination occurs on three different levels:

First degree price discrimination: Persuade all consumers in the market to reveal the
price they are willing to pay. E.g. Silent bid/Ebay

Second degree…

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Harry Bindloss




Example ­ Train operating company (TOC)

Peak times ­ Inelastic PED
Off peak times ­ Elastic PED




Work out the profit maximising output point and then from that you can work out that the
supernormal profit gained from the elastic and inelastic diagrams can lead to increase in…

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Harry Bindloss




7. Can avoid congestion

8. Source of economies of scale

Disadvantages of Price Discrimination

1. Some consumers will end up paying higher prices. These higher prices are likely to be
allocatively inefficient because P > MC.

2. Decline in consumer surplus.

3. Those who pay higher prices may…

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