When a producer charges different prices from different customers for the same product at the same time then the form is exercising?

Charging different prices for the same product in different markets until the MR of the last unit sold equals the MC of the product sold in each market is described by ______. (A) Price discrimination of first degree(B) Price discrimination of second degree(C) Price discrimination of third-degree(D) Equilibrium price(E) Price discrimination Choose the correct answer from the options given below: (adsbygoogle = window.adsbygoogle || []).push({});

1. (A) and (B) only
2. (A) and (C) only
3. (C) and (E) only
4. (A) and (D) only

Answer (Detailed Solution Below)

Option 3 : (C) and (E) only

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Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to. 

There are three types of price discrimination: first-degree or perfect price discrimination, second-degree, and third-degree. These degrees of price discrimination are also known as personalized pricing (1st-degree pricing), product versioning or menu pricing (2nd-degree pricing), and group pricing (3rd-degree pricing).

1. First-degree Price Discrimination

• First-degree discrimination, or perfect price discrimination, occurs when a business charges the maximum possible price for each unit consumed.
• Because prices vary among units, the firm captures all available consumer surplus for itself or the economic surplus. 
• Many industries involving client services practice first-degree price discrimination, where a company charges a different price for every good or service sold.

2. Second-degree Price Discrimination

• Second-degree price discrimination occurs when a company charges a different price for different quantities consumed, such as quantity discounts on bulk purchases.

3. Third-degree Price Discrimination

• Third-degree price discrimination occurs when a company charges a different price to different consumer groups.
• For example, a theater may divide moviegoers into seniors, adults, and children, each paying a different price when seeing the same movie.
• This discrimination is the most common.
• Third-degree price discrimination is sometimes known as direct price discrimination. Because a firm directly sets different prices depending on distinct groups of consumers (e.g. age)
• If you buy on the day, tickets are usually more expensive. If you book 7 days in advance and stick to a specific time of the day, the price is lower.
• On the same train, customers can be paying different prices for the same ticket.
• Charging different prices for the same product in different markets until the MR of the last unit sold equals the MC of the product sold in each market is described by Price discrimination of third-degree.

4. Equilibrium price

• On a graph, the point where the supply curve (S) and the demand curve (D) intersect is the equilibrium. The equilibrium price is the only price where the desires of consumers and the desires of producers agree—that is, where the amount of the product that consumers want to buy (quantity demanded) is equal to the amount producers want to sell (quantity supplied). 

Therefore, charging different prices for the same product in different markets until the MR of the last unit sold equals the MC of the product sold in each market is described by Price discrimination of third-degree and Price discrimination.

Last updated on Sep 21, 2022

The UGC (University Grants Commission) has released the exam schedule for the UGC NET CBT 2022. The exam will be conducted from 16th September to 18th September 2022. The admit card for the same will be released by the 10th of September and the 13th of September 2022. Candidates can download their admit cards through the official portal. The UGC NET CBT exam will consist of two papers - Paper I and Paper II. Paper I will be conducted of 50 questions and Paper II will be held for 100 questions. Candidates can refer to UGC NET preparation tips to improve their performance for the exam.

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