Question

Subject Economics:

QUESTION TWO

2.2 Discuss and motivate whether the following market structures can engage in price discrimination:

2.2.1 Perfect competition

2.2.2 Monopoly

Answer 1

Answer-Perfect competition is a market structure in which there are a large number of buyers and sellers, they are having complete information on the commodity-like price, market strategies, etc, in this type of market seller sale commodities which are identical in nature. Sellers are price takers, in case if any of the sellers will increase a single penny of the commodity then the customers will shift to another seller who is still selling at the same price. So it is clearly showing that there is no case of price discrimination in Perfect market competition , and perfect competition market cannot engage in the price discrimination

In the case of monopoly, there are very few sellers who are selling the goods and commodities, in monopoly, there is a restricted entry and exit and buyers have not complete information about the goods and commodities. In a monopoly, the firm is price maker which means monopolist charges the maximum price for the commodity that each buyer is willing to pay, the monopolist does not care about the affordability of the consumer they only want to maximize their profits, that's why it involves the price discrimination and monopoly market can engage in the price discrimination activities.