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Which of the following is an example of price discrimination? (A) Advertising free installation but charging a fee (B) Charging consumers for an extended warranty period (C) Offering pensioners cheaper prices than non-pensioners (D) Selling at the retail price imposed by the manufacturer - HSC - SSCE Business Studies - Question 2 - 2008 - Paper 1
Question 2
Which of the following is an example of price discrimination? (A) Advertising free installation but charging a fee (B) Charging consumers for an extended warranty ... show full transcript
Worked Solution & Example Answer:Which of the following is an example of price discrimination? (A) Advertising free installation but charging a fee (B) Charging consumers for an extended warranty period (C) Offering pensioners cheaper prices than non-pensioners (D) Selling at the retail price imposed by the manufacturer - HSC - SSCE Business Studies - Question 2 - 2008 - Paper 1
Step 1
Offering pensioners cheaper prices than non-pensioners
Answer
This is an example of price discrimination. Price discrimination occurs when a business charges different prices to different groups of consumers for the same good or service. In this case, offering pensioners cheaper prices exploits the difference in price elasticity of demand between pensioners and non-pensioners.