s] (Third-degree price discrimination) There is a monopolist and two groups of consumers, students andgeneral consumers. The total demand of students is ๐ท1(๐) = 10โ๐, while the total demand of general (non-student)consumers is ๐ท2(๐) = 40 โ 2๐. The monopolistโs (short-run) variable cost function is ๐(๐) = 2๐. Throughout thisquestion, the monopolist uses linear pricing.(a) [5 marks] Discuss reasons why the demands of the two groups may be di๏ฌerent. For the purpose of thisquestion, assume that every consumer has unit demand. (Limited
Question
s] (Third-degree price discrimination) There is a monopolist and two groups of consumers, students andgeneral consumers. The total demand of students is ๐ท1(๐) = 10โ๐, while the total demand of general (non-student)consumers is ๐ท2(๐) = 40 โ 2๐. The monopolistโs (short-run) variable cost function is ๐(๐) = 2๐. Throughout thisquestion, the monopolist uses linear pricing.(a) [5 marks] Discuss reasons why the demands of the two groups may be di๏ฌerent. For the purpose of thisquestion, assume that every consumer has unit demand. (Limited
Solution
The demands of the two groups, students and general consumers, may be different due to several reasons:
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Income: Students typically have lower income compared to general consumers. This means they may be more price sensitive and hence demand less at the same price level.
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Needs and Preferences: Students and general consumers may have different needs and preferences. For example, students may need more educational products while general consumers may need more household items. This difference in needs and preferences can lead to different demand levels.
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Time Availability: Students may have more flexible schedules compared to working general consumers. This could potentially affect their shopping behavior and hence their demand.
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Price Sensitivity: Students, due to their limited budget, may be more price sensitive than general consumers. This means that a price increase could lead to a larger decrease in demand for students than for general consumers.
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Market Information: General consumers may have more market information and experience than students, which could affect their demand. For example, they may be more aware of alternative products or suppliers, which could lower their demand for the monopolist's product.
Remember, these are just potential reasons. The actual reasons could vary depending on the specific context and market conditions.
Similar Questions
There is a monopolist and two groups of consumers, students andgeneral consumers. The total demand of students is ๐ท1(๐) = 10โ๐, while the total demand of general (non-student)consumers is ๐ท2(๐) = 40 โ 2๐. The monopolistโs (short-run) variable cost function is ๐(๐) = 2๐. Throughout thisquestion, the monopolist uses linear pricing
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