The strategy underlying price discrimination is:
A)to reduce per unit cost by charging higher prices to those with the most inelastic demand and lower prices to those with the most elastic demand.
B)to charge higher prices to customers who have good substitutes available to them.
C)to increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand.
D)to charge everyone the same price, but limit the quantity they are allowed to buy.

Question

Quizplus · Accepted Answer

The strategy underlying price discrimination is to increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand. This way, the seller captures all consumer surplus and increases total revenue compared to a uniform pricing strategy. Option A is partially correct, as charging higher prices to those with more inelastic demand would reduce the overall cost, but it doesn't explain the rationale behind price discrimination. Option B is incorrect, as price discrimination is not about charging higher prices to customers who have good substitutes available to them. Option D describes the strategy of quantity discrimination, not price discrimination.

The Strategy Underlying Price Discrimination Is