A company manufacturing shampoo charges a low price to customers who buy sachets on the premise that these customers belong to lower income groups and are more price sensitive.On the other hand, it charges higher prices to customers who purchase the same shampoo in bottles.This is an example of:
A)predatory pricing.
B)vertical price fixing.
C)horizontal price fixing.
D)price discrimination.
E)bait and switch.

Question

Quizplus · Accepted Answer

This is an example of price discrimination, where the company charges different prices for the same product to different customers based on their willingness to pay. By charging a lower price for sachets, the company is targeting lower-income customers who are more price-sensitive, while charging higher prices for bottles to customers who are willing to pay more for the convenience and packaging. This practice is legal as long as it does not harm competition or consumers.

A Company Manufacturing Shampoo Charges a Low Price to Customers