DP Economics Questionbank

State two conditions necessary for price discrimination to take place.

Using a diagram (or diagrams), explain why a profit maximizing firm might charge a higher price in one market than in another.

Firm B conducted a market survey and found out that the price elasticity of demand for its brand of tea is 0.8 among urban customers, whereas it is 1.2 among customers in rural areas. The sales director said “This information could help Firm B to raise its revenue, by trying to separate the two markets, provided that certain conditions are satisfied”. Explain this statement.