Which of the following scenarios would fall under the category of price discrimination?Options Reduced fares for bus travel for those above the age of 60 Higher insurance premiums for young motoristsA Yes YesB Yes NoC No NoD No YesABCD
Question
Which of the following scenarios would fall under the category of price discrimination?Options Reduced fares for bus travel for those above the age of 60 Higher insurance premiums for young motoristsA Yes YesB Yes NoC No NoD No YesABCD
Solution
The correct answer is A (Yes, Yes). Both scenarios fall under the category of price discrimination.
Price discrimination occurs when a seller charges different prices to different consumers for the same product or service, and these price differences are not due to cost differences.
In the first scenario, reduced fares for bus travel for those above the age of 60 is a form of price discrimination known as third-degree price discrimination, where different groups of people are charged different prices.
In the second scenario, higher insurance premiums for young motorists is also a form of price discrimination. Insurance companies often charge young drivers more because statistically, they are more likely to be involved in accidents. This is also an example of third-degree price discrimination.
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