Nobody downloaded yet

Microeconomics- price discrimination - Essay Example

Comments (0) Cite this document
To define price discrimination, it is when a company charges different prices to different consumers for the reason not associated with cost (Sloman,2002). The problem with Eskom is that it is charging different rate to industry and residential consumers and hence practicing…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER95.7% of users find it useful
Microeconomics- price discrimination
Read TextPreview

Extract of sample "Microeconomics- price discrimination"

Download file to see previous pages According to microeconomics, companies usually charge higher prices to those consumers who have a higher consumer surplus or those who are willing to pay higher. Higher consumer surplus lubricate the process of increase in price and consumer with higher surplus do not resist to price hike. Similarly, by doing this Eskom would have increased its revenue as those consumers who are more likely to pay higher prices are being charged more. The reason why this surplus is higher for residential consumers than industrial consumers could be illustrated from our own experience. As residential consumers we have less cash assets than industrial consumer who are bestowed with large cash balance. Hence, we find it more attractive to pay the increased price rather than changing the electricity supplier and paying connection charges as it would undertake both connection costs and time. Whereas, on the other hand industrial consumer would resist to price change bestowed with large money balance and in bid to remain competitive. (McConnell and Brue, 2001)
Although, the policy of price discrimination might reduce the demand of electricity but in doing so the firm will make sure that consumer who are paying more is provided more electricity to earn higher revenue. For example, if a same product is sold to different consumers at different prices, then the company would make sure that consumers who are paying more are provided with commodity in order to maximize the company’s revenue. In our case residential consumers are those who are paying more and hence will be provided more power supply. (Economist, 2008)
Therefore, any price increase to industrial consumer would mean a customer is lost due to low consumer surplus for these users. This is a reason why Eskom charges higher prices to residential consumers than industrial consumer. Similarly, logic provides us with answer why Eskom does not charge both ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
(“Microeconomics- price discrimination Essay Example | Topics and Well Written Essays - 750 words”, n.d.)
Microeconomics- price discrimination Essay Example | Topics and Well Written Essays - 750 words. Retrieved from
(Microeconomics- Price Discrimination Essay Example | Topics and Well Written Essays - 750 Words)
Microeconomics- Price Discrimination Essay Example | Topics and Well Written Essays - 750 Words.
“Microeconomics- Price Discrimination Essay Example | Topics and Well Written Essays - 750 Words”, n.d.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Microeconomics- price discrimination


... Point “a” does not represent an efficient allocation of factor of production. To see this, consider a point like ‘b’ in the same graph shown below. It provides the same level of output of good X as point “a” since we still are on the same X isoquant, but the production of Y has increased since now we are on a higher Y isoquant. Similarly, we could have picked a point on the Y isoquant through point “a” which is tangent to a higher X isoquant. This would imply a higher production of good X without reducing the output of good Y. Since such Pareto improvements are possible, point “a” can’t be an efficient allocation. 2) The Coase theorem states that in the absence of transaction costs, ownership of property rights does not matter... Point “a”...
3 Pages(750 words)Essay


...? Microeconomics 08/26 Microeconomics In 2007, the potato chip industry in the Northwest was competitively structured and in long-run competitive equilibrium; firms were earning a normal rate of return and were competing in a monopolistically competitive market structure. In 2008, two smart lawyers quietly bought up all the firms and began operations as a monopoly called “Wonks.” To operate efficiently, Wonks hired a management consulting firm, which estimated a different long-run competitive equilibrium. The new company is now a “monopoly” which is only the sole provider of potato chip in the entire country. Now, there is only a single supplier of potato chip all across the region (Brigham, 1976). As all...
6 Pages(1500 words)Essay

The differences between macroeconomics and microeconomics

..., pp.101) argues that in macroeconomics, the economy is studied as a whole whereas in microeconomics, the economic actions of people including individual firms and the individual households are studied. Wessels explains the difference between the two branches of economics. He argues that if in microeconomics the function of demand and supply determines the price of goods whereas, in macroeconomics the price level of all goods is determined. Similarly, microeconomics focuses on the number of workers employed by a firm whereas, macroeconomics studies the number of workers employed in an economy. In microeconomics when price...
5 Pages(1250 words)Essay


...of goods. As this factor is responsible for price fixation of goods and services, the change in supply vs. demand position can lead to change in price. As resources become limited, microeconomics tries to analyze the relationship between market conditions, product prices, as well as the market mechanism which establishes this relationship. Such mechanism has a great role to play in the allocation of resources, in such scenario. Therefore, microeconomics has a significant role in determining the conditions required for a perfect competition. It also studies the conditions which may have led to market failure, when results are not produced efficiently....
10 Pages(2500 words)Term Paper

Price Discrimination

...Demonstrate how the principle of willingness to pay underlies consumer surplus and the practice of price discrimination. Explain the equilibrium solution to an industry that is able to practice perfect price discrimination. Ans: The conception of the consumer's surplus originated from the Marshallian theory of cardinal utility. Hence to establish the relationship between consumer's surplus and willingness to pay we have to go through the theory of cardinal utility and consumer's equilibrium in single commodity case. The cardinal theory of utility is based on the following assumptions. 1. Utility is cardinally measurable. 2. The utility derived from any commodity is measured by the amount of money that the consumer is willing... ...
15 Pages(3750 words)Essay

Price Discrimination -Economics

...with the "valid" practices within the framework of law (Brue, 2004). The works of economics in various fields have been criticized for not being implementable in the real world and this has been one of the most serious failures of economists. However, there are still a number of theories which can be implemented in the real markets as they are in the books and work well in the human environment due to the fact that they have been developed over years after observing human nature and business functioning methods. This paper will be discussing the concept of price discrimination and how it can be used to benefit firms instead of the general notion that discounts and special fares for different target...
8 Pages(2000 words)Essay

Managerial Economics - Price Discrimination

...Managerial Economics: Define the different degrees of price discrimination. Provide one real world example for each. Price discrimination de s the charging of different prices from the buyer by the seller without in essence implying negative discrimination. There are three degrees of each time of price discrimination based on market segmentation and demand elasticity. First-degree price discrimination is the sale of identical goods are sold at different prices to each individual consumer. An example will be sale of new and used pianos where despite...
3 Pages(750 words)Essay

Microeconomics: Price Theory

...Price Theory 15 October This paper will throw light upon the price theory which is extremely important to understand. Demand and supply plays the most pivotal role in deciding the price of a commodity or a service. The same will be elucidated further with the help of Euro star which is a fast- speed train which covers areas in London, Brussels and Paris. At the end of the paper the reader will be clearly able to understand the concept of price theory. Prices theory is one of the most important parts of Economics. Generally the price of a commodity or service is decided by taking into consideration the production cost incurred on the...
4 Pages(1000 words)Essay

Price Discrimination in Cinema Market

.... “The Impact of Price Discrimination on Revenue: Evidence from the Concert Industry.” Accessed 5 March 2014. Mankiw, Gregory N. and Mark P. Taylor. 2006. Microeconomics. Connecticut: Cengage Learning EMEA. McAfee, R. Preston. 2009. Competitive Solutions: The Strategists Toolkit. Princeton: Princeton University Press. Orbach, Barak Y. and Liran Einav. 2007. Uniform prices for differentiated goods: The case of the movie-theatre industry. International Review of Law and Economics 47: 1-26. Ross, Stephen A. 1979. “The Economic Theory of Agency: The Principals Problem.” American Economic Review, 63:...
6 Pages(1500 words)Research Paper

Price Discrimination

...Price Discrimination due: Introduction In various supermarkets shelve spaces that are close to the eye levels of customers are charged more expensively to vendors who wish to market their products in supermarkets. In comparison, those shelves near the floor or to top are charged much less. It also occurs when goods and services are provided to different customers at different prices. The price difference is unrelated to the cost of producing the goods and services. It is evident that price varies which shows evidence of price discrimination of products. Price discrimination is the way firms and chain of sellers sell at prices disproportionate of the products sold or buying at prices disproportionate to the marginal productivities... of the...
6 Pages(1500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Microeconomics- price discrimination for FREE!

Contact Us