A firm practicing direct price discrimination will charge a higher price to a. Consumers known to have an inelastic demand b. All consumers c. Consumers known to have a unitary elastic demand d. Consumers known to have an elastic demand

Question

Redbull

Business

19 March, 06:08

A firm practicing direct price discrimination will charge a higher price to a. Consumers known to have an inelastic demand b. All consumers c. Consumers known to have a unitary elastic demand d. Consumers known to have an elastic demand

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Scarlett Larson · Answer 1

c) Consumers with an inelastic demand

Explanation:

When the price increase, the demand for the product will decrease. The increase in price makes the customer look for a product substitute with cheaper price. Substitutes will keep the demand elastic since it can change easily.

But some customer has an inelastic demand, which means that their demand does not easily change when the price is increased. This type of customer can't substitute and have no choice but to keep buying even at a higher price.