Suppose a producer is able to recognize two different groups of customers, one having an elastic demand and the other having an inelastic demand. Price discrimination by the producer would most likely
A) involve decreasing the price for only the group with inelastic demand.
B) involve decreasing the price for only the group with elastic demand.
C) not occur because it is illegal.
D) involve increasing the price for both groups.
E) involve increasing the price only for the group with elastic demand.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups based on their price elasticity of demand. The group with elastic demand is more sensitive to price changes, so lowering the price for them can increase quantity demanded significantly, leading to higher total revenue for the producer.

Suppose a Producer Is Able to Recognize Two Different Groups