ECO101H1 Lecture Notes - Price Discrimination, Fixed Cost, Marginal Cost
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ECO101H1 Full Course Notes
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Document Summary
Publishers set different prices for textbooks in different geographic markets. Increases profits by permitting monopolist to sell additional output without lowering price. Monopolist will charge high price to customers with low price elasticity of demand and low price to customers with high price elasticity of demand. Monopolist must be able to segment (separate) its customers (if customers with high price elasticity of demand by at low price and then resell at low price to other customers, price discrimination fails. ) Why do stores issue coupons, in newspapers or flyers or on the web, which permit buyers to obtain a price discount? (most individual ignore these coupons) Buyer who use coupons: high elasticity of demand (buy at discounted, lower price) Buyers who do not use coupons: low elasticity of demand (buy at full, higher price) If consumer pays more to producer as a result of monopoly price: consumer worse off by producer better off by .
