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In: Economics

Popular movie video DVD copies are often sold for $MOP 70 to $150, whereas less popular...

Popular movie video DVD copies are often sold for $MOP 70 to $150, whereas less popular movies can sell for more than $MOP 200. Why? (Hint: Use the model of third degree price discrimination.)

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Expert Solution

*Answer :-

Third Degree Price Discrimination occur When Seller charge A Difference Prices To Different Group Of Consumer For Same Product. These Consumer can be Identify by Their Sex,Age Group, Their Interest For Particular Product Etc.

In That Situation Popular Movie Video DVD Copies Are Often Sold For $MOP 70 To $150, Whereas Less Popular Movies Can Sell For More Than $MOP 200 It Is Because Of Popular Movie DVD's Price Is more Elastic If they change Its Price It affect Its Demand So They Maintain Its Price Under $ 70 to $150 Because They Have To Increase Their Sells Of Popular Movies DVD they Don't Want to Get Loss In That. So Which Profit they Do not Earn In Popular Movie DVD they want To Earn it From Less Popular Movies By Increasing Its Price Because That Product Don't Have A High Demand Their Demand Is Less And Their Price Also Inelastic So Their Price Goes Up Consumers Demand Stay At The Same Level So In Third Degree Price Discrimination Firm Charge Movie According To Consumers Interest And Their Willing To Pay Ability.

  

Rahul Sunny answered 2 years ago
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