Firms can only use one form of price discrimination. Indicate ...

[lindiwe]

Firms can only use one form of price discrimination.
 
  Indicate whether the statement is true or false

Question 2

The compensation variation and equivalent variation will be closer to each other when
 
  A) the income elasticity is greater.
  B) the budget share is greater.
  C) the price change is smaller.
  D) the income elasticity is smaller.

[joshbk44]

Answer to Question 1

False. Firms often combine different forms of price discrimination in order to maximize profits. For example, a ski resort often uses peak-load pricing because skiing is more popular during the high season when the snow is better. It may also charge locals less than tourists for lift tickets. And it may also use group price discrimination, discriminating based on age.

Answer to Question 2

D

[lindiwe]

Thanks for the timely response, appreciate it

[peter]

Gracias!