To whom does a price-discriminating firm charge the highest price?
A)The group with the largest demand.
B)The group with the most elastic demand.
C)The group with the least elastic demand.
D)The group with demand that is unit-elastic.

Question

Quizplus · Accepted Answer

Price-discriminating firms charge the highest price to the group with the least elastic demand because this group is less sensitive to changes in price and is willing to pay a higher price. The group with the most elastic demand is charged a lower price because they are more price-sensitive and may not purchase the good/service at a higher price. The group with a demand that is unit-elastic is charged an intermediate price. The group with the largest demand is not necessarily charged the highest price as the level of demand does not always correspond to price elasticity.

To Whom Does a Price-Discriminating Firm Charge the Highest Price