Advantages (Merits) of Price discrimination
- Price discrimination increases the total revenue of the monopolist. This is because, output sold increases due to the act of charging different prices to different consumers of similar units of the same commodity. .
- It helps to reduce income inequalities. This is because the rich consumers are charged higher prices and the low income earners are charged low prices.
- It enables the low income earners to get essential commodities at fair prices. For example medical services, transport and housing etc.
- Price discrimination helps producers or countries to dispose of the surplus output through the process of dumping. Dumping is important to the producer because it encourages exploitation of resources within the home country by widening the external market for goods and services.
- The profits earned by a monopolist through price discrimination can be used to expand on the business and to improve on the welfare of the workers.
6. Price discrimination increases quantity sold and consumed example for electricity, the first units are charged a high price as compared to the extra units. Therefore the more units you use, the less charge you incur for the extra units.
CATEGORIES Economics
TAGS Dr. Bbosa Science