Price Discrimination in Economics

The video tutorial explains third degree price discrimination, where firms charge different prices to different consumer groups based on demand elasticity. It covers examples like age discounts and airline tickets, and uses a ski resort scenario to illustrate how prices are set for adults and teenagers. The tutorial discusses the effects on profits and consumer surplus, highlighting that while firms benefit, the impact on consumers varies. The video concludes with a discussion on the broader consequences and benefits of price discrimination.

What is the primary basis for third degree price discrimination?

• Cost of production

• Elasticity of demand among consumer groups

• Seasonal demand variations

• Government regulations

Which of the following is an example of third degree price discrimination?

• Age-based movie ticket pricing

• Seasonal sales

• Bulk discounts

• Loyalty rewards

Why do adults have a relatively inelastic demand for ski lift tickets compared to teenagers?

• Adults have less disposable income

• Adults have more alternative leisure activities

• Adults prefer other sports

• Adults are less responsive to price changes

How does the ski resort determine the price to charge adults for lift tickets?

• By offering discounts to frequent visitors

• By using a flat rate for all consumers

• By setting a price above the marginal revenue curve for adults

• By matching the price to the teenagers' demand curve

What is the effect of charging a higher price to adults on the ski resort's profits?

• Profits decrease due to fewer tickets sold

• Profits remain unchanged

• Profits increase due to higher revenue from adults

• Profits decrease due to increased operational costs

How does price discrimination affect consumer surplus for teenagers?

• It has no effect on consumer surplus

• It increases consumer surplus for teenagers

• It decreases consumer surplus for teenagers

• It eliminates consumer surplus entirely

Which group benefits from a lower price due to third degree price discrimination?

• All consumers equally

• Consumers with elastic demand

• Consumers with inelastic demand

• Only adult consumers

What is a common advantage of third degree price discrimination for firms?

• Increased total profits

• Reduced consumer base

• Lower production costs

• Decreased market share

In which industry is third degree price discrimination commonly observed?

• Entertainment

• Technology

• Construction

• Agriculture

What is a potential disadvantage of third degree price discrimination for some consumers?

• Decreased firm profits

• Increased consumer surplus

• Equal pricing for all consumers

• Higher prices for those with inelastic demand