Introduction of Price Discrimination
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Overview - Perfect Price Discrimination
Price Discrimination definition is something which every student must be aware of in order to gain effective knowledge in the study of economics. It is a microeconomic pricing strategy in which similar or largely identical commodities are transacted at different prices by the same vendor in different markets. It relies on the customer’s willingness to pay and the elasticity of demand. Other factors of Price Discrimination include market share, monopolistic market, uniqueness of the product, sole pricing power, etc. The prices are higher than the equilibrium price under Price Discrimination. Other terms used in place of Price Discrimination include equity pricing, dual pricing, tiered pricing and preferential pricing.
Perfect Price Discrimination
The highest level of Price Discrimination is termed as perfect Price Discrimination. It is also called first-degree Price Discrimination. In this case, the firm tries to gain as much market surplus it can achieve. First-degree Price Discrimination observes Pareto efficient level of output where marginal cost is equal to the marginal willingness to pay. As seen in the above figure, the producer surplus is equal to the total surplus which is (A+B). Therefore, you can observe that there is no deadweight loss even though there is no consumer surplus either. In the end, the quantity and price become equal and it turns into perfect competition. So, in practical scenarios, it is agreed that perfect Price Discrimination cannot exist. In real life, the closest one can get to perfect Price Discrimination through second-degree Price Discrimination or two-part tariff.
The Vedantu Edge
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It is quite understandable that our surroundings are a reflection of our inner qualities and vice versa. Taking note of this, students must always keep the environment healthy for studying. It will enhance a student’s focus and develop consistency in the studying hours. Lighting of the room also plays a role sometimes when it comes to developing a healthy mood. Students are suggested to have not too bright and not too dim lighting. It Has soft lighting which doesn’t keep you distracted and also ensures a comfortable reading experience for the students. . The study table should not be piled up with the old books that student’s o not need at all. It must be organized since organized surroundings lead to an organized mindset and well arranged time management.
After reading the entire article a student must have garnered quality information that improves their quality of preparation and guides them towards better grades in the exams ahead.
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FAQs on Price Discrimination
1. What are the Conditions for Price Discrimination?
Two necessary conditions should be present for Price Discrimination to occur. These two conditions are:
The Seller should have control of the supply of the commodity and should be able to exercise monopolistic power.
There should be at least two sub-markets or more identified by the seller.
Other Conditions Include:
Price elasticity of the product should be different in different markets, which means if the seller increases the price, the buyer should not reduce the volume of purchase.
The seller should also make sure that buyers from the low-priced market are not selling the commodity to the buyer from the high-priced market.
2. Is Price Discrimination Illegal?
Price Discrimination is illegal only when it is done based on gender, religion, race, nationality, or if it violates price-fixing and antitrust laws. There is no definite law that states Price Discrimination is illegal, but if it is practised based on gender, race, religion or nationality, it becomes illegal and unethical as well. There are certain companies like Victoria’s secret, Men’s Wearhouse, Fraser and office depot that practice Price Discrimination. There are certain laws in India which state the prohibition of the use of the dominant position of a firm in the market and Price Discrimination as well.
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5. How to find Price Discrimination?
Price Discrimination could be found on www.Vedantu.com . The article is available in the PDF format and could be accessed by the students on any device. Earlier, the location of the student used to play a major part in their access to the resources. Now, Vedantu has ensured that this no longer becomes the road block for the students in their journey to become a good human resource for the country.
