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Introduction to Microeconomics (3) - Essay Example

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Introduction to Microeconomics (3)

i. Where the demand curve is downward sloping and the price of petrol rises to 3 per litre then the market demand is less elastic. This makes the government charge a higher price of 3 as compared to other markets.
i. If price of petrol paid by consumers rises to 2.75 it means that the market demand is more elastic than the market selling petrol at 3 per litre. The market whose demand is more elastic will have a low price charged.
i. For the price of petrol paid by the consumer to raise to 2.75 it means that the elasticity of demand in this market is more than in all other markets. The market with a more elastic demand translates to a low price being charged. ...Show more

Summary

a) For the Government to achieve price discrimination where a litre of petrol will be sold at different prices in different markets it means that price elasticity of demand must be different in all the sub-markets. price changes will depend on the elasticity of demand
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