If you need HELP in ECONOMICS come HERE!!!! (=

Hey 2010 IB'ers. As you all know, the May exams are approaching rapidly. I thought I would create a thread for Economic'ers', (students who take Economics), and we bascially review EVERYTHING in Economics together, Micro, Macro, International Trade, and Growth & Development. I don't know about you guys, but we finished our syllabus like 2 weeks ago.
Anyway, so I thought that this thread would be for people who have questions on any topic. We could all help one another in this way.
That's all. :smile:

Reply 1

yoyo462001

Wouldn't Economists be a better term than 'Economicers' :p:

Reply 2

satisfactionatlast

yoyo462001

Wouldn't Economists be a better term than 'Economicers' :p:

lol good point: it would be but right now, we're all 'Economicers', as in workers. we're working and learning.....
We're not qualified to be 'Economists' yet :smile:

Nice, i'm up for it!

Latim

Nice, i'm up for it!

got any question to get this thread moving? :smile:

Reply 5

Latim

can anyone help me and explain price discrimination and its advantages and disadvantages?

Reply 6

satisfactionatlast

Latim

can anyone help me and explain price discrimination and its advantages and disadvantages?

sure thing! :smile:

Okay first of all, Price discrimination is when producers charge different prices for the same good to different consumers. For example, Disney Land (tickets sold to adults & children differ in price)

Okay now you should know the conditions for price discrimination:
1. Downward slope of demand curve
2. At least 2 or more groups of consumers with different elasticities of demand
3. System to prevent the transaction if cheaper goods

Now I'm going to explain each point separately.

1. (picture the downward demand curve)
2. as an example: if right now u call an airport to book a flight, and there's one hour left for that flight. ONLY FIRST CLASS is available (and u know first class is more expensive than business or economy). So anyway, the person in the airport tells u that first class is available (he does not tell u that economy is available too).
BUT this flight is SOOOO urgent (for example ur wife giving birth...'lol just an example'), or if u have an important meeting and you CANT afford to delay it, so u willingly pay for it, thus being an inelastic good for you. So when u arrive and enter the plane, u discover the free seats in the economy. But your demand was so inelastic, so it doesnt really matter. you get the picture...right? (:
3. example, movie tickets is 5 Euros, I buy them at 2 Euros & charge u 3 Euros. ( I make some money )
so that's why some cinemas ask u for ur ID cards, so in order to prevent this, student ID cards

* Remember that profit can be maximised through price discrimination due to different price elasticities of demand, with producers charging a higher price in markets where demand is less price-elastic. (the air line booking example, the guy's state of urgency made his demand for the airline ticket inelastic)

............
Advantages of Price Discrimination
1.Firms will be able to increase revenue. This will enable some firms to stay in business who otherwise would have made a loss. (For example price discrimination is important for train companies who offer different prices for peak and off peak)

2.Increased revenues can be used for research and development which benefit consumers

3.Some consumers will benefit from lower fares. (for example, old people benefit from lower train companies, old people are more likely to be poor).

Disadvantages of Price Discrimination
1.Some consumers will end up paying higher prices. These higher prices are likely to be allocatively inefficient because P>MC.

2.Decline in consumer surplus.

3.Those who pay higher prices may not be the poorest. ( for example, adults could be unemployed, OAPs well off)

4.There may be administration costs in separating the markets.

5.Profits from price discrimination could be used to finance predatory pricing.

the advantages/disadvantages I took it off from http://www.economicshelp.org/microessays/pd/price-discrimination.html
since it has explains it more clearly than me lol (:
Hope this helps!

Oh and btw, if u didnt understand my explanation, I recommend this website--> http://www.s-cool.co.uk/alevel/economics/market-structure-1/price-discrimination.html
hope this clears things for you (: