Economics 9708/43 — May/June 2015
Cambridge A-Level · A Level Data Response and Essays · worked solutions for every part, with the mark scheme
Topics Objectives and Pricing Policies of Firms · Efficiency and Market Failure · Economic Growth and Sustainability · Utility Theory · Performance of Firms in Different Market Structures · Government Policies to Correct Market Failure · +10 more
Consumer exploitation?
Economists often speak of price discrimination. Some would argue that price discrimination exploits consumers. Others say that it is related to demand and supply and is acceptable in a market economy.
When you buy a rail ticket the price you are asked to pay may well depend on the departure time, the route, the rail operator, whether you have a discount railcard, whether you buy an economy ticket or a first-class ticket and whether you buy the ticket on the Internet or at a ticket office.
Similar price variations occur when booking hotel rooms and when buying theatre tickets. In hotels, the same room is cheaper on some days of the week or at certain times of the year than others. In theatres, it is cheaper to buy a ticket for an afternoon performance than a ticket for a Saturday evening. It is also cheaper to sit in the seats further from the stage than in those seats nearer the stage.
Some football clubs also adopt a similar approach with what they call 'price-categorisation'. There are three categories of price depending upon whether the football team is playing another team with well-known players which is near the top of the league or whether the team is in the middle or near the bottom of the league. To charge more for a game against a top team is asking the buyer to believe that the game will be better than a game against a lower-placed team. However, excitement and entertainment are sometimes just as great with the lower-placed team. Football clubs also often charge lower ticket prices to children attending football matches with an adult.
The rail operator and the football club justify the charges by saying that they require the extra revenue in order to improve the facilities and infrastructure and cover increased costs. The railway track needs replacing; the football stadium needs continual maintenance. Some would argue, however, that it is simply an attempt to maximise profit. Interestingly, not all the more expensive tickets are sold as people do not buy them.
Source: Adapted from Telegraph Sport, January 2013
What is meant by 'price discrimination'?
Identify one example of price discrimination and one example of non-price discrimination in the article. Explain the reason for each of your choices.
Draw and explain a diagram for price discrimination.
The article says that price discrimination 'is related to demand and supply and is acceptable in a market economy'. Is there any relationship between price discrimination and demand and supply?
The article says that 'price discrimination exploits consumers'. The implication is that it should not be allowed. Do you agree with this assertion?
The rest of this paper
6 more questions- Q2Utility Theory · Performance of Firms in Different Market Structures · Efficiency and Market Failure · Government Policies to Correct Market Failure25M
- Q3Short-Run and Long-Run Production · Costs of Production · Objectives and Pricing Policies of Firms · Growth and Survival of Firms · Market Structures25M
- Q4Wage Determination and Labour Market Intervention25M
- Q5Effectiveness of Macroeconomic Policies25M
- Q6Economic Development and Living Standards · Characteristics of Countries at Different Levels of Development · Economic Growth and Sustainability25M
- Q7Components of Aggregate Demand · The Multiplier and National Income Determination · Economic Growth and Sustainability25M