Question

Please give a detailed example for the following:

Pricing Discrimination

Provide an example of when additional charges are applied base on time/day and explain rather or not the overcharge was appropriate.

Answer 1

Price discrimination is when different people are charged a different price for the same product. An example of price discrimination is Airline service.

Here, if we book a flight ticket 2 months before the departure date the price of the same ticket will be less and the same ticket will cost much more just a day before the departure. That is because the people deciding to travel just a day before the departure are having more inelastic demand. This overcharge is appropriate because that allows the flight service to operate with some profit and allow the people with elastic demand to choose the service at a lower price.