Suppose a producer is able to recognize two different groups of customers, one having an elastic demand and the other having an inelastic demand. Price discrimination by the producer would most likely O involve increasing the price for both groups. involve decreasing the price for only the group with elastic demand. involve decreasing the price for only the group with inelastic demand. involve increasing the price only for the group with elastic demand.

Suppose a producer is able to recognize two different groups of customers, one having an elastic demand and the other having an inelastic demand. Price discrimination by the producer would most likely O involve increasing the price for both groups. involve decreasing the price for only the group with elastic demand. involve decreasing the price for only the group with inelastic demand. involve increasing the price only for the group with elastic demand.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Price Discrimination

Price discrimination or differential pricing is based on the principle that the seller will charge the buyer a price based on the buyer’s ability and willingness to pay for the product rather than applying uniform pricing for all.

Question

### Understanding Price Discrimination

Suppose a producer is able to recognize two different groups of customers, one having an elastic demand and the other having an inelastic demand. Price discrimination by the producer would most likely:

- Involve increasing the price for both groups.
- Involve decreasing the price for only the group with elastic demand.
- Involve decreasing the price for only the group with inelastic demand.
- Involve increasing the price only for the group with elastic demand.

*Analysis*: Producers typically raise prices for groups with inelastic demand and lower prices for groups with elastic demand to maximize revenue.

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