Question

Price discrimination is most profitable when A. consumers can be grouped into different buckets with different elasticities. B. consumers have the same elasticity of demand. C. consumers pay higher prices for? lower-quality services. D. consumers can be grouped into the young and the old.

Answer 1

Price discrimination is more profitable when (A)consumers can be grouped into different buckets with different elasticities.

The market in which consumer is insensitive to price change or in this case less elastic must have a higher price than the market where the consumer is more elastic or more sensitive.In the market where the elasticity is lower, a higher price would be charged comparatively to the market which is more elastic where lower price would be charged.

Also,if both the market had same elasticity,it would cancel out each other and prices would be termed as equal.