Economic: Price-discrimination
Sherlotte Kwok (11) F.6A
Do the following constitutes price-discrimination?
{a} Students pay a lower price for a take-away set lunch than nonstudents in Suzuki Restaurant. {6 marks}
{b} People who bring their own cup to Starbucks can pay less 3 dollars for
each cup of drinks. {6 marks}
Answers
{a}
Price discrimination is a situation under which the seller charges different
prices on the same good for different consumers, not due to difference in
costs.
In this case, it is price discrimination because different prices are charge
on students and non-students for the same set lunch.
As students may choose to have their lunch at school or outside, so they
have a more elastic demand than that of non-students.
To maximize wealth, Suzuki Restaurant set a lower price to students and
a higher price to non-students.
{b}
It is not price discrimination because the costs are different.
As people bring their own cups, Starbucks staffs can use less time and
water to wash the cup and use the time to serve more customers. The
cost of production for the drinks sell to these people is lower than the cost
for the drinks sell to the people that have no own cups.
Due to the difference between the cost of production, Starbucks charges
different prices on the same drinks for these two groups of customers.