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State whether T/F: and explain The more elastic the demand for a product is, the more...

State whether T/F: and explain

The more elastic the demand for a product is, the more difficult it is for the company to price discriminate.

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Answer #1

The statement is true

Suppose the demand for a product is highly inelastic which means that the demand curve is steeper. In that case it will be easy to charge two different prices from two consumer groups and the price difference will be relatively higher. This happens because the consumer groups are not price sensitive and monopolist can easily charge them different prices. Now consider the demand to be highly elastic so that the demand curve is relatively flat. In this situation consumers are highly sensitive to prices which means different prices from different consumer groups cannot be charged as easily as compared to the case with inelastic demand. The price difference between very small and there will be no greater benefit of price discrimination in this case.

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