Definition – Price discrimination involves charging a different price to different groups of people for the same good. For example – student discounts, off peak fares cheaper than peak fares. Different Types of Price Discrimination 1. First Degree Price Discrimination This involves charging consumers the maximum price that they are willing to pay. There will …
A look at the effect of tariffs on consumers, government tax revenue, domestic firms and net economic welfare.
Readers Question: Explain with the help of diagrams the equilibrium of a firm having monopoly power in the market in the short-run and long-run? The diagram for a monopoly is generally considered to be the same in the short run as well as the long run. Profit maximisation occurs where MR=MC. Therefore the equilibrium is …
Penetration pricing is a strategy used by a firm who wishes to enter a new market and gain a high market share through selling at a low price. The aim of penetration pricing is to attract a loyal customer base through offering the most competitive price in the market and undercutting rivals and well-known brands. …
The US has recently placed tariffs on Chinese imports and is threatening to further increase tariffs in the next few weeks. The effect of these tariffs is to increase domestic prices, provide some benefits to domestic producers, but also cause costs to US exporters. There is a strong risk that these tariffs will cause loss …
Price discrimination occurs when firms sell the same good to different groups of consumers at different prices. There are often different types of price discrimination offered. Often they are categorised in the following way: 1st-degree price discrimination – charging the maximum price consumers are willing to pay. 2nd-degree price discrimination – charging different prices depending …
Definition of allocative efficiency This occurs when there is an optimal distribution of goods and services, taking into account consumer’s preferences. A more precise definition of allocative efficiency is at an output level where the Price equals the Marginal Cost (MC) of production. This is because the price that consumers are willing to pay is …
A trade war involves the imposition of tariffs between trading partners. This will almost certainly cause a fall in economic welfare for all the countries who experience higher tariffs and a fall in trade. However, this fall in economic welfare is not the same as a recession (a fall in GDP). In some circumstances, a …