Price discrimination is a pricing strategy whereby a firm’s prices for the same

Question

Price discrimination is a pricing strategy whereby a firm’s prices for the same or very similar goods vary for customers in different markets. This can help the firm attain more profits compared to charging a single price. For example, a movie theater may offer a discount to students but charge non-students a higher price. Suppose you are a consultant to Southwest Airlines. How would you use price discrimination to get the most profits from your customers? Do you have to be a monopoly to engage in price discrimination? Explain.

Include total revenue, marginal revenue, total cost and marginal cost, and the theory of profit maximization in your response.

Explanation / Answer

Price discrimination is possible under Monopoly market, price discrimination refers to charging different diffrent price to customersfirm will divide the market based on elasticity of demand

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