In order to practice price discrimination a firm must be in a market such that the consumers in its market
A) all have identical tastes.
B) all have identical price elasticities of demand.
C) have different price elasticities of demand.
D) have the same demand for its product.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups of consumers based on their willingness and ability to pay. This can only be done if there is variation in price elasticities of demand across different consumer groups. If all consumers have identical tastes and price elasticities of demand, then there is no way to charge different prices to different groups without losing some customers or revenue. If consumers have the same demand for the product, there is no basis for price discrimination.

In Order to Practice Price Discrimination a Firm Must Be