This includes natural monopolies such as gas, electricity supply, and transport services. In practice, first-degree discrimination is rare. The same logic can be applied to travel and holidays, with child and family discounts encouraging demand and helping generate revenue. For example, small cinemas might be better able to survive if they can offer low priced off-peak cinema tickets to the overs for day-time screenings. Many people do not seem to distinguish between curly and kinky hair but structurally there is a rather major difference.
Curly hair is simply a spiral or wave while kinky hair has a torsion twist which can be felt as a permanent crimp where the hair strand turns around itself see the diagram. For example, if cinemas or theme parks set low prices for children or even zero price for those under a certain age , or offer with family discounts, more parents will be able to attend, and accompany their children. Third-degree discrimination is the commonest type. Benefits to groups of consumers If we look specifically at goods and services consumed by children, but where adults are needed to accompany them, it can be argued that charging children a much lower price enables families as a whole to benefit, and gain increased group utility. Limitations Ultimately, the ability to price discriminate may be limited because the conditions necessary are not fully met. Employing ticket inspectors or other security systems adds to the cost of preventing seepage in public transport. Conclusion Clearly, with global commodities, world markets tend to settle on one price at any one time, given the process of arbitrage. For example, having more passengers on a train that is going to run anyway provides additional revenue to the train operators. This is especially relevant when we look at transport, and the high ticket prices charged for peak travel, compared with off-peak. If the market can be separated, the price and output in the relatively inelastic sub-market will be P and Q and P1 and Q1 in the relatively elastic sub-market. Managing the flow customers Price discrimination according to the time of day means that the flow of customers into retail stores can be managed more effectively, which might provide a better experience for shoppers and spread out the work for staff. In other words, there are limits on the extent to which different prices can be applied. Benefits to firms include: This revenue may be used to add to profits given that the marginal cost of one extra passenger is virtually zero or to cover new fixed costs, such as track or safety improvements. Lower prices could also result from the application of scale economies as above. The firm is able to charge the maximum possible price for each unit which enables the firm to capture all available consumer surplus for itself. Model agencies collude to fix rates Regulators find leading model agencies guilty of price fixing. Reader question from Ehizele on why some hair is more 'breakable' will follow soon!! Enables survival As a result of generating additional revenue, price discrimination can enable firms to survive. There must be no seepage between the two markets, which means that a consumer cannot purchase at the low price in the elastic sub-market, and then re-sell to other consumers in the inelastic sub-market, at a higher price. The torsion of kinky hair is basically the strand twisting around itself. Profit maximisation Firstly, matching prices to the specific characteristics of the market, and its various segments, is a profit maximising strategy see above , where the firm can extract some or even all of the consumer surplus available in the market, and turn it into producer surplus i. From a macro-economic perspective, international trade is likely to be created by price discrimination. For example, rail and tube travellers can be subdivided into commuter and casual travellers, and cinema goers can be subdivide into adults and children. There are three types of price discrimination — first-degree, second-degree, and third-degree price discrimination.
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Kinked Demand Curve
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