IGCSE Economics Paper-1: Specimen Questions with Answers 2 - 2 of 27

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Discuss whether price discrimination can ever be of benefit to consumers.

Explanation

There are certain conditions when consumers will be benefitted from price discrimination.

  • Products available at lower prices: If the consumers buy products from a market where demand is elastic, they will be benefitted. All the products in this market are available at lower prices. Consumers have to pay less. Surplus of the consumers will be increased by purchasing goods from this market.

  • Different prices according to use: Monopolist charges different prices from different categories of customers for the same goods and services. For example different electricity rates are charged from domestic consumers and commercial consumers. Domestic Consumers pay less electricity bills than the commercial consumers.

  • Price discrimination according to age: Train tickets are available at discounted rates for children and senior citizens. But these tickets are available at high prices for adults. Consumer will be benefitted if he/she belongs to those age groups.

  • Knowledge of market: Price discrimination is possible if consumer is ignorant about current market situation. When buyers are familiar with the prices in various markets. He’ll buy a commodity from cheap market.

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