Lawyers frequently supply their services at different prices for different clients based on the clients’ ability...

Lawyers frequently supply their services at different prices for different clients based on the clients’ ability to pay. How does this differential pricing impact exchange efficiency? Be specific.

Expert Solution

Price discrimination is a pricing strategy where the producer charges different prices for the same product or service to different consumers. This strategy has a positive impact on exchange efficiency.

According to the above case, lawyers will be able to have positive exchange efficiency if they charge different level of prices to different clients. This is because they will be able to increase their client base by charging less to those who cannot afford the lawyer services at normal market price and charging high to the clients who can afford it.

Exchange efficiency occurs when a particular service provided to various clients will not lead to decrease in utility provided to one client if another client is provided with same utility.

Using this pricing strategy will not decrease the service or utility provided by the lawyer to one client if the same service is provided to another client.

Thus as seen, price discrimination will not only help lawyers to earn more but also provide same utility level to all clients.

So price discrimination impacts exchange efficiency in a positive way.

Rahul Sunny answered 3 years ago

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