What is price discrimination?

• A. Charging Different Prices to Different Customers for the Same Product Based on Willingness to Pay.
• B. Charging the Same Price to All Customers.
• C. Offering Discounts to All Seniors Only.
• D. Setting Price Solely Based on Production Cost.

Answer: (A)

Price discrimination is the practice of charging different prices to different customers for the same product based on their willingness to pay. This approach aims to capture more of the consumer surplus by tailoring prices to how much each buyer values the item, rather than using a single price for everyone. It relies on the ability to separate customers into groups or individuals with different price sensitivities and on limiting resale so lower prices don’t simply move to others. Common forms include targeted discounts such as student or senior programs, peak versus off-peak pricing, or offering different versions of a product. The description that best fits is charging different prices to different customers for the same product based on willingness to pay. In contrast, charging everyone the same price describes uniform pricing, and pricing solely based on production cost refers to cost-based pricing rather than discriminatory pricing.