Asked by Nacole Watkins on Apr 25, 2024

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​A firm practicing direct price discrimination will charge a higher price to

A) ​Consumers known to have an elastic demand
B) All consumers
C) Consumers known to have an inelastic demand
D) ​Consumers known to have a unitary elastic demand

Direct Price Discrimination

A pricing strategy where a seller charges different prices to different customers for the same product or service, based on their willingness to pay.

Inelastic Demand

A situation in which demand for a good or service is barely affected by changes in price.

Elastic Demand

When consumer demand for a product significantly rises or falls following a small change in its price.

  • Understand the significance of demand elasticity in the implementation of price differentiation tactics.
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EJ
Ebony Jones6 days ago
Final Answer :
C
Explanation :
Direct price discrimination involves charging different prices to different consumers based on their willingness to pay. Consumers with an inelastic demand are willing to pay more for a product, so a firm would charge them a higher price. In contrast, consumers with an elastic demand are more price-sensitive and would not be willing to pay a higher price, so the firm would charge them a lower price. Consumers with a unitary elastic demand have a constant willingness to pay regardless of price, so the firm would not use direct price discrimination on them. Therefore, the best choice is C, as direct price discrimination involves charging a higher price to consumers with an inelastic demand.