Question

Price discrimination is most profitable when

Answer 1

A. Consumers can be grouped into different buckets with different elasticities.   
Price discrimination is the practice of charging different populations of potential customers different prices in an attempt to maximize profit. Let's take a look at the options and see what makes sense for price discrimination.  
A. Consumers can be grouped into different buckets with different elasticities.  
* Exactly! If you have multiple populations (buckets) that have different elasticities, then the optimal price point for each population would be different. So this is the correct choice.  
B. Consumers can be grouped into the young and the old. 
* Yes, it's possible to group consumers into old and young populations. But does age affect how these customers would purchase? Maybe, but there's nothing here to tell you which to charge more and why. So this is a bad choice.   
C. Consumers pay higher prices for​ lower-quality services. 
* This option may be desired by some businesses, but doesn't give any reason to practice price discrimination. There's nothing in this option to distinguish one population from another, so this is a bad choice.  
D. Consumers have the same elasticity of demand. * This option doesn't make sense. If you have several populations of c
ustomers with the same elasticity of demand, then the best price for maximum profit would be the same price for every population. So this is not a good choice.