Question

4. What is second degree price discrimination and third degree price discrimination? Explain with examples.

5. Compare the three types of market structure: perfect competition, monopoly and monopolistic competition.

6. Explain Giffen goods and Veblen goods and their similarities and differences in terms of price and income elasticity of demand.

7. Explain the cobweb model.

8. Explain how the elasticity of demand affects the revenue of the seller.

9. Explain the relationship between the marginal cost curve of an individual firm and the short run market supply curve in a perfect competition industry.

10. Explain the relationship between the price elasticity of demand and supply and the incidence of tax of a unit sale tax.

11. Explain the free rider problem and provide examples.

12. Explain externalities and the Pigovian solutions.

13. Explain why oligopoly firms have incentive to form cartel and yet the cartel tends to breakdown.

14. Explain Coase theorem.

15. Explain the kinked demand curve model.

Answer 1

4.What is second degree price discrimination and third degree price discrimination?Explain with examples.

Price discrimination is charging different prices charged for the same goods and services.Price discrimination is catergorized into three types namely,First degree price discrimination,second degree price discrimination and third degree price discrimination.

Second degree price discrimination is when the seller charges different prices for different quantities consumed.

Example:Most of the time super markets charge higher discounts for higher quantity purchased,another example is in case of electric units consumed,where households are charged lesser than commercial usage.As they consume lesser units.

Third degree price discrimination is charging different prices to different price groups.These groups of consumers are classified on the basis of factors like age,sex,location or time of consumption.

Example:Train tickets are cheaper when you book them much prior to the journey,however when the book them closer to the date of journey the are costlier.So the same ticket is charged differently depending on the time that they were booked.