A firm practicing direct price discrimination will charge a higher price to
A)Consumers known to have an elastic demand
B)All consumers
C)Consumers known to have an inelastic demand
D)Consumers known to have a unitary elastic demand

Question

​A firm practicing direct price discrimination will charge a higher price to
A)​Consumers known to have an elastic demand
B)All consumers
C)Consumers known to have an inelastic demand
D)​Consumers known to have a unitary elastic demand

Quizplus · Accepted Answer

Direct price discrimination involves charging different prices to different consumers based on their willingness to pay. Consumers with an inelastic demand are willing to pay more for a product, so a firm would charge them a higher price. In contrast, consumers with an elastic demand are more price-sensitive and would not be willing to pay a higher price, so the firm would charge them a lower price. Consumers with a unitary elastic demand have a constant willingness to pay regardless of price, so the firm would not use direct price discrimination on them. Therefore, the best choice is C, as direct price discrimination involves charging a higher price to consumers with an inelastic demand.

​A Firm Practicing Direct Price Discrimination Will Charge a Higher

A Firm Practicing Direct Price Discrimination Will Charge a Higher