Skip to content

CMA Foundation · Fundamentals of Business Economics and Management · Forms of Market

A railway offers cheaper fares to students and senior citizens than to other adult passengers for the same journey. This is an example of:

This is third-degree price discrimination, where a seller charges different prices to separate identifiable groups of consumers with different price elasticities of demand. It is not first-degree, which needs a different price for every individual at their maximum willingness to pay.

  1. APerfect competition pricing
  2. BCost-plus pricing in a competitive market
  3. CFirst-degree discrimination charging each person their maximum price
  4. DThird-degree price discrimination based on groups with different elasticitiesCorrect

Explanation

Charging different prices to identifiable groups, such as students and seniors, whose demand elasticities differ is third-degree price discrimination. First-degree would require a separate price for each individual at their maximum willingness to pay, which fixed concessional fares do not do.

Did you get it right without looking?

One question tells you little. A timed set on Forms of Market shows your real accuracy, how long you take and where you lose marks.

Practise Forms of MarketFree diagnostic mock

More Forms of Market questions