A price-discriminating firm charges the lowest price to the group that
Business · High School · Sun Jan 24 2021
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A price-discriminating firm charges the lowest price to the group that is typically less elastic in its demand, meaning the group is less responsive to changes in price. In other words, the group with a less elastic demand is less likely to reduce its quantity demanded when faced with a price increase.
Price discrimination occurs when a firm charges different prices to different groups of consumers for the same good or service. The firm identifies different market segments and sets prices based on the willingness and ability of each segment to pay. The group with a less elastic demand is often charged a higher price, while the group with a more elastic demand is charged a lower price.