Declining-block quantity discrimination makes sense if
A) buyers of smaller quantities are more price sensitive than buyers of larger quantities.
B) buyers of smaller quantities are less price sensitive than buyers of larger quantities.
C) demand for the good is perfectly elastic.
D) the lower price for larger quantities encourages all consumers to purchase the larger quantity.

Question

Quizplus · Accepted Answer

Declining-block quantity discrimination, where larger quantities are sold at a lower price per unit, makes sense if buyers of smaller quantities are less price sensitive than buyers of larger quantities. This is because sellers can charge higher prices to those less sensitive to price changes (buyers of smaller quantities) and lower prices to those more sensitive (buyers of larger quantities), maximizing revenue from both groups.

Declining-Block Quantity Discrimination Makes Sense If