Question

passage require analysis and breakdown

Price discrimination can affect the success of a firms profit margins. According to Twin (2020), “Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to” (Twin, 2020). Direct price discrimination is when a price is set specifically for a type of demographic based on the thought process of how many units will be sold because of this. An example used frequently when looking online with the cost of a movie ticket. A direct price discrimination is used when selling a ticket at a discounted price for college students based on the lower income, they have versus the older adults vising the movies. This is due to the fact that they know college students would be frequent visitors to the movies based on demographic, but in order to have success of gaining their business, they must lower the price for them to be able to profit from that group. An example used online for indirect price discrimination was the purchasing of air line tickets. Depending on the time of the day and the volume of consumers looking to purchase the tickets, the price of the flight may vary. A flight that is taking off in the early morning will have less passengers aboard, this is why the ticket is sold for less. As the time gets later in the day and more people are looking to board flights, the cost of the flight will indirectly increase due to the demand of the product in conjunction with the volume of consumers (Pettinger, 2019).

Both examples stated above are different reasons as to why an organization could benefit from both indirect and direct price discrimination. The whole reasoning behind the price changes is because organization know when they can get the most money for their products sold and to which demographic of consumers at what specific times. Depending on the type of market structure the organization is in, this can certainly have an effect on the outcome of price discrimination. According to Zeder (2020), there are four types of market structures, perfect competition, monopolistic competition, oligopoly, and monopoly. Depending upon how many competitors you have within the market structure that your organization is in, this will depend on the amount in which you can price discriminate (Zeder, 2020). In a market structure that is highly competitive with multiple firms selling the same product, there is going to be less price discrimination due to trying to compete with the surrounding competitors when it comes to pricing. In these types of markets, you can price discriminate, but the ultimate determination of pricing is going to be based off the pricing of the competitors. A market structure with little competition could perhaps do more when it comes to price discrimination because they have less to worry about with matching pricing with those around them. Every market undoubtfully uses price discrimination to ensure optimal income by using demographic and timing to make deals to ensure the most capital gain, but stated above, I believe the monopolistic markets to have more control over their pricing in general based on lack of competition.

Answer 1

Profit of a firm depends on price discrimination.

Price discrimination refers to the charging of different prices  for the same product from different people.There may be direct or indirect price discrimination.

The effect that demograpgy can have on price discrimination is very clear. Direct price discriination is when a discrimination is on a particular demographic group with the thinking that many units will be sold because of such discrimination. As for eg movie tickets sold to college students at discounted rate than those sold to elderly movie goers. College students are frequent movie goers and so even though price is lowered profit will be more

.Indirct price discrimination is charging different prices on online ticket purchase.Depending on the time of the day ,the price of ticket may vary.An early morning flight will cost less than an afternoon flight.

The effect on the outcome of price discrimination depends on the market structure ie monopoly, oligopoly,perfect competition , monopolistic competition ,the organization is in.The market structure which is highly competitive will have less price discrimination than a market structure which is less competitive.In monopolistic competition, there is less competition and so the market has more control on the price of the product.Overall an organization can benefit from both direct and indirect price discrimination as well as depending on the market structure of the organization.