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Heres some sample essay questions on price discrimination that has appeared in

previous years A levels or prelims of JCs.


November 1996 Alevel
Air fares on major airlines from South Africa to London and Europe will cost more
during peak travelling seasons. The fares are to be fixed by a twenty-strong group
of airline companies.
(a) Explain how price discrimination can occur, and consider whether the above
situation is an example of price discrimination in action.
[12]
November 2001 Alevel
(a) Explain how monopolies can discriminate between buyers by charging
different prices for the same product or service.
[10]
MJC Prelim 2006
(a) Explain what is meant by price discrimination and whether price
discrimination may be more likely in the airline industry than in the market
for medicinal drugs.
[12]
(b) To what extent has the increase in internet usage made price discrimination
more difficult? [13]
November 2002 Alevel
In the UK, train tickets may be obtained more cheaply if they are bought in
advance. In August 2000, the railway companies jointly announced that
these cheap tickets would be available only at major stations. Passengers
living near smaller stations would, therefore, have to pay the full cost of
the ticket.
(a)Explain what is meant by price discrimination and discuss whether
this is an example of price discrimination.
[10]
(b)Identify the type of market structure that enables companies to
practice price discrimination, and discuss whether that market
structure is ever beneficial to consumers.
[15]
NYJC Prelim 2007
The price of a flight from say, Singapore to Beijing, can vary widely if one
buys the ticket in Singapore compared to Beijing (or New York or Tokyo or
elsewhere).

(a)Explain what is meant by price discrimination and discuss whether


the above statement is an example of price discrimination.
[10]
(b) Discuss if price discrimination is always beneficial.
[15]
Of these questions, the last two, N2002 and NYJC Prelim questions are the most
common and standard essay questions. Most price discrimination questions are
usually part (a) questions (as you can see from the examples), so if your test
tomorrow is a whole question on price discrimination, highly likely the structure is
similar to the NYJC prelim question.
Note that almost all the part (a) questions start by asking you Explain what is
meant by price discrimination, or basically asking you what price discrimination is.
This is usually followed by asking you whether the example in the context is an
example of price discrimination. These questions are usually 10 mark questions.
Heres the structure to such questions.
1. Definition: Price discrimination occurs when a producer sells a specific
commodity to different buyers at two or more different prices for reasons not
associated with differences in cost.
(Start you essay with the definition. Common error is where students leave
out reasons not associated with differences in cost.)
2. Explain the conditions for price discrimination to occur (PRE)
(a) Seller must be able to control what is being offered in the market. That is,
seller must withhold significant market power.
(b) Seller must be able to separate the market. That is, seller must be able to
prevent the resale of commodity from buyer to buyer.
(c) Seller must face different demand curves from separate groups of buyers;
elasticities of demand of different groups of buyers must differ.
Refer to the context and give examples of how each condition is FULFILLED in
the context. For example, condition (c), In the case of air flights, airline firms
face differing elasticities of demand from different groups of commuters.
Demand for business-class air flights are more inelastic since commuters
usually travel due to work purposes and are thus less responsive to price
changes. Conversely, demand for budget-class air flights are relatively elastic
since commuters usually travel for leisure and may postpone or call off the
flights should prices increase.
The second part of the question where youre asked whether the subject is
an example of price discrimination, youre to IDENTIFY the type of price
discrimination taking place.
There are three degrees of price discrimination (we went through this last
week). Of the three, the most common and hence most important one that

youve to know well is third-degree price discrimination. Of the three, the


least likely to be tested on is first-degree price discrimination. Hence study
the other two degrees in detail.
3. Depending on the question, explain the second/third degree price
discrimination. Explain also HOW this context is that form of price
discrimination.
Eg. Third-degree price discrimination occurs when consumers are grouped
into two or more independent markets and a separate price is charged in
each market. This is possible because these independent markets have
differing elasticities. In the case of public transport, demand for public
transport like buses and MRTs are generally inelastic for the working adults
class because the fares take up a small proportion of their income. Hence,
quantity demanded of public transport among this group of people is
generally irresponsive to changes in price. Conversely, demand for public
transport is more price elastic among the student and elderly classes since
the fares take up a much larger proportion of their incomes, if any. These
differing price elasticities among these two classes of people allow transport
firms like SMRT to charge a higher price for adult fares and a lower price for
student and elderly concession fares.
Give examples pertaining to the context throughout your essay. Also include the
graph of price discrimination (depending on second or third degree, draw the
relevant one, it should be found in your notes).
Next, also study the pros and cons of price discrimination. There should be aplenty
in your notes. Remember that for part (b) questions asking you whether price
discrimination is beneficial, use the TAS model. Your essay structure should be
something like this:
1. Thesis: Price discrimination is NOT beneficial.
Give 3 well-explained, detailed reasons why price discrimination is not
beneficial. Eg. Consumer surplus reduced (explain why, look up for them in
your notes), inflationary pressures due to higher prices etc.
2. Anti-thesis: Price discrimination may be beneficial in some cases.
Give 2 to 3 well-explained, detailed reasons. Eg. Necessary for production to
carry on, if price discrimination does not take place, firm may be forced to
shut down and consumers may lose out because the entire industry may fail
to operate (cannot consume that good at all), cross-subsidisation etc.
3. Synthesis: Price discrimination is largely not beneficial, although it is
necessary in certain industries where price discrimination is the only way
production is possible to continue.
Thats all, good luck!

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