To price discriminate, firms must face markets with different elasticities.

Question

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Price discrimination involves charging different prices to different groups of customers based on their willingness to pay. For this to be successful, firms must be able to identify and target markets with different elasticities of demand, meaning that some markets are willing to pay more for a good or service than others. By charging higher prices to those with a relatively inelastic demand and lower prices to those with more elastic demand, firms can maximize their profits.

To Price Discriminate, Firms Must Face Markets with Different Elasticities