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    Price change

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    Movie theaters, airlines, and many other businesses like to charge customers different prices based on time of the day, age, and purchase dates. Why?

    Provide an example of a price discrimination for a good or service that you thought it to unfair. Do you still believe that the discrimination is unjustifiable

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    Solution Preview

    For any firm, price discrimination occurs if the following market conditions are met
    - if the firm can separate consumers in to different groups (such as by age, by gender, by race, by income level)
    -and the separation can be enforced (i.e. the company must be able to tell which group one belongs to)

    Why do firms choose to do so?
    First, we have to understand that only market makers (such as monopoly or oligopolies) price discriminate, because there is no need for competitors to do that (they are price takers). When a monopoly sets its price, it faces a downward sloping demand curve. If the company lowers price, it will attract ...

    Solution Summary

    Price change