Price discrimination will be profitable only if the elasticity of demand in different markets is:
Options
AUniform
BDifferent
CLess
DZero
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Price Determination in Different MarketsPYQ - Nov 2020Question 65 of 20
All Questions Correct Answer
✅ Option b — Different
All Options:
- AUniform
- BDifferent
- CLess
- DZero
Detailed Solution & Explanation
To determine when price discrimination will be profitable, we need to consider the elasticity of demand in different markets.
• The concept of price discrimination refers to the practice of charging different prices for the same product in different markets.
• According to the law of demand, the elasticity of demand measures how responsive the quantity demanded is to a change in price.
• For price discrimination to be profitable, a firm must be able to charge higher prices in markets where demand is less elastic and lower prices in markets where demand is more elastic.
• This means that the elasticity of demand in different markets must be different, allowing the firm to take advantage of the varying price sensitivities of consumers.
The correct answer is based on the principle that price discrimination relies on differences in demand elasticity to generate profits.
• Option A is incorrect because uniform elasticity would not allow for price discrimination.
• Option D is also incorrect because zero elasticity implies that demand is completely unresponsive to price changes, making price discrimination impossible.
About This Chapter: Price Determination
Paper
Paper 4: Business Economics
Weightage
15%
Key Topics
Perfect Competition, Monopoly, Monopolistic, Oligopoly
This high-weightage chapter covers all four market structures: Perfect Competition, Monopoly, Monopolistic Competition, and Oligopoly. Students learn how price and output are determined under each structure, along with key concepts like Price Discrimination, Kinked Demand Curve, and the conditions of equilibrium (MR = MC).
View Official ICAI SyllabusExam Strategy Tip
This chapter carries the highest weightage (~15%). Focus on features of each market, the shape of AR and MR curves, and understand why firms in Perfect Competition are 'Price Takers' while Monopolists are 'Price Makers'.
Key Concepts to Understand
Related Comparison Tables
More Questions from Price Determination in Different Markets
Under which of the following forms of market structure does a firm have no control over the price of its product?
A firm encounters its "shutdown point" when:
Kinked demand curve hypothesis is designed to explain in context of oligopoly
Which of the following is not a characteristic of a "Price Taker"?
Which of the following is not an essential condition of pure competition?
In the long run, a firm in a perfectly competitive market earns:
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