Question

QUESTION 1 When buying a car, salespeople try to learn a lot about you: what do you for a living, why you want a car, etc. They are not simply being friendly, they are setting up for price discrimination. How? So they can charge you a higher price if your demand curve is quite elastic. So they can make sure you won't resell the car you buy. Because they know certain kind of customers are more work and want to charge accordingly. They better understand your willingness to pay and charge you accordingly.

Which of the following goods/services are example of bundling?

What would be the answers to question 1,7, and 2 if you could provide explanations to how you got to your answers to have a better understanding Thank you.

Answer 1

1.d) to better understand your willingness to pay and charge you accordingly

Under price discrimination, different prices are charged to different consumers for the same product based on their wllingness to pay so as to extract maximum consumer surplus.

Option a is incorrect since a higher price is charged in case of relatively inelastic demand and a lower price is charged from elastic demand.

2. D) it prevents both resale and encourages distinguishableness

it prevents resale since if third class travelers could afford second class trip they would have already bought it. It encourages disntinguishness by offering widely different facilities in second class and third class coaches.

7.(C)food at a grocery store

Bundling refers to the act of tie in sales where two or more commodities are sold together. This often happens when different food items are sold together as a package on discount.

Newspaper subscriptions is an example of block pricing; amusement park tickets is an example of two part tariff.