A firm switching from a single price to a price discrimination scheme will _______ the price for the group of consumers with relatively elastic demand and _______ the price for the group of consumers with relatively inelastic demand.
A)decrease; increase
B)decrease; decrease
C)increase; increase
D)increase; decrease

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different consumer groups based on their price elasticity of demand. For consumers with elastic demand, the firm will decrease the price to increase quantity sold, while for those with inelastic demand, the firm will increase the price to maximize revenue.

A Firm Switching from a Single Price to a Price