If a firm is practicing third- degree price discrimination and is charging a price of $15 per unit to consumers in Group A and a price of $10 to consumers in Group B, which of the following is true?
A)Group B consumers have a lower price elasticity than Group A consumers.
B)Group B consumers are less responsive to price changes than Group A consumers.
C)Group B consumers have a greater price elasticity than Group A consumers.
D)Group A consumers have a greater price elasticity than Group B consumers.

Question

Quizplus · Accepted Answer

According to the law of demand, consumers with a more elastic demand are more responsive to price changes. Thus, since Group A consumers are purchasing at a higher price than Group B consumers, it is likely that Group A consumers have a lower price elasticity than Group B consumers, making C the correct answer.

If a Firm Is Practicing Third- Degree Price Discrimination and Is