Price discrimination is the practice of charging different customers or groups of customerâs different prices for the same product.
Why does price discrimination occur?
Describe the conditions that must be present for price discrimination to occur.
Justify your answer.
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Sample Answer
Why does price discrimination occur?
Price discrimination occurs because sellers can charge different prices to different customers and groups of customers and still make a profit. This is because the demand for a product is not always the same for all customers. Some customers are willing to pay more for a product than others. By charging different prices, sellers can capture more of the consumer surplus, which is the difference between what a customer is willing to pay for a product and the price they actually pay.
Conditions that must be present for price discrimination to occur:
There are three conditions that must be present for price discrimination to occur:
- The seller must be able to identify different customer groups. The seller must be able to distinguish between customers who are willing to pay different prices for a product. This can be done by using different pricing strategies, such as charging different prices based on age, location, or time of purchase.
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