If sellers could price-discriminate and charge two different prices to two different groups of buyers in order to increase revenues, then the sellers would charge
A) a higher price to the buyers whose demand is elastic.
B) a higher price to the buyers whose demand is inelastic.
C) a higher price to the buyers whose demand is unit-elastic.
D) the same price, actually, because price-discrimination will result in lower revenues.

Question

Quizplus · Accepted Answer

Sellers would charge a higher price to the group of buyers whose demand is inelastic because they are less price-sensitive and therefore more willing to pay a higher price. This would result in increased revenues for the seller. In contrast, charging a higher price to the group of buyers with elastic demand would potentially lead to a significant decline in revenue as the buyers may look for substitutes or stop buying altogether. Unit-elastic demand means a change in price results in a proportional change in quantity demanded, so sellers would likely charge the same price to both groups of buyers.

If Sellers Could Price-Discriminate and Charge Two Different Prices to Two