Question

1. Explain perfect price discrimination and who would want to use this pricing method.

2. Give me three examples of businesses that use two-part pricing strategies.

3. Explain why sports stars make so much money.

4. Describe human capital and how you can improve yours! 

5. Marginal rates below are imaginary to demonstrate the concept of marginal tax rates:

$0 -------------------------------------$10,000 0% tax rate

$10,000------------------------------$20,000 15% tax rate

$20,001------------------------------$40,000 30% tax rate

$40,001-------------------------------$500,000 60% tax rate

The families below have taxable income subject to the above tax brackets.

1. $5,000 How much total tax will family one pay? ________________

2. $25,000 How much total tax will family two pay? ________________

3. $35,000 How much total tax will family three pay? ________________

4. $100,000 How much total tax will family four pay? ________________

6. Are the above tax rates progressive or regressive? Why?

Answer 1

1.First-degree price discrimination, alternatively known as perfect price discrimination, occurs when a firm charges a different price for every unit consumed. The firm is able to charge the maximum possible price for each unit which enables the firm to capture all available consumer surplus for itself.

Many industries involving client services practice first-degree price discrimination, where a company charges a different price for every good or service sold.

2.Two part pricing strategy

As the name suggests the consumers are charged two times. It is a form of pricing in which consumers are charged two times. Firstly they have to pay an entry fees which is fixed and then a usage fees which is per unit price.

The fixed or lump-sum charge that does not vary with usage or consumption and an additional charge that does vary with usage or consumption.

Providers of services including banking and finance, telecommunications and transport commonly apply two-part pricing.

3. Professional athletes are making too much money in a society where salaries and wages are traditionally based on the value of one's work. In today's society, one should be paid according to the job's economic importance and their value to society.The sportstars have a huge fan following. The fan love to watch them.Media companies pay the leagues and teams billions of dollars for the rights to show the games on television and other video devices.These businesses know that millions of fans watch their games. So, the ads shown during these matches are huge source of earnings for television channels. Also the organization's who advertise their products are also benefited as large number of people watch these matches and there is huge possibility that people will attract to their products and buy them this resulting in huge revenue to the companies. We live in a world of demand and supply.Athletes supply the talent and people demand to see it on television or by paying a lot to see the athletes in person.

4. Human capital in simple terms means that all qualities that human being should have which will add to productivity. These include knowledge, good education, commitment, dedication, punctuality, sound health, skills, experience etc. Intellectual and human capital are treated as renewable sources of productivity. Organizations try to cultivate these sources, hoping for added innovation or creativity.

Human capital can be improved by adopting all those measures which will help a person becoming a good human being. These includes getting good education, gaining more experience, learning new skills and enhancing knowledge, improving public speaking and presentation skills, being committed and involved in the work, staying fit and healthy.