Question

5) Price discrimination requires the ability to sort customers and the ability to prevent consumers consumers from accumulating a surplus. Explain how the following can function as price discrimination: w the following can functioniay Requiring airlines travelers to spend at least one Saturday night away from home to qualify for a low fare Publishing coupons in the newspaper or online Charging high-income patients more than low-income patients for plastic surgery. a. b. c.

Answer 1

Price discrimination require the ability to so it customers and the ability to present customers form accumulating a surplus Explain a) if it is required for the air lines travelers to spend at least one Saturday to quality for low fare means that there are people unto wants to travel only for one day, specifically for business purposes i. e by imposing this requirement monopolist is able to divide the market into two groups i. e business travels and the tourists And in this way the monopolist can charge two different prices in two different groups of the market. Coupons are also used as a tool of Third degree discrimination. The consumes with highly elastic demand i. e they are very sensitive to changes in the prices are going to spend considerable time in finding the coupons from the newspaper. Whereas consumers who are less price sensitize i. e with less elastic demand won't spend these time in finding coupons from the news paper