PRESENTATION: Power Point (10 slides) . Prepare a Power Point presentation by an

Question

PRESENTATION: Power Point (10 slides)

.

Prepare a Power Point presentation by answering the following questions related to Price Discrimination-A Phenomenon of Real World Economy:

1. What is Price Discrimination?

2. Elucidate the conditions under which a business is able to engage in Price Discrimination?

3. Explain different types of Price Discrimination and how they are used in the real world of economy?

4. Discuss the extent to which Price Discrimination is beneficial to producers and Consumers?

Explanation / Answer

1.

Price discrimination is a pricing mechanism where a producer charges customers with different prices based on their willingness to pay.

2.

Conditions required to be satisfied in order for a business firm to engage in price discrimination:

The market should be under imperfect competition because in the case of perfect competition each customer would be well informed and price cannot be discriminated against. second, prevention of resale .i.e.if customers can buy at cheap rates and sell at a higher price to another customer then discrimination does not occur. Thirdly, identify different markets segmented based on the price elasticity of demand among various consumers and charge accordingly.

3.

There are three types of price discrimination as follows; First degree, second degree and third-degree price discrimination. In first-degree price discrimination consumer surplus boils down to zero as companies charge exactly each consumer's willingness to pay. In second-degree price discrimination, companies can't incur zero consumer surplus but segregate consumers into groups and charge the same price to each consumer in that group. This helps raise marginal profits. In third-degree price discrimination, companies price products, and services based on demographics of different groups of customers. The third-degree price discrimination is more relevant to the real world economy.

4.

Price discrimination is practised to incur profits and stay in the business. One, firms can earn profits for services which were otherwise not profitable. Two, some groups benefit from cheap pricing. Third, it leads to a decline in consumer surplus. Fourth, there exist administration costs but still, producers are better off than before.

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