Assignment No.

4
Demand Analysis and Optimal Pricing

Name: Braña, Elaine Myrtle L. Date: October 15, 2022

Section: 1BSA-ABM3 Professor: Mr. Joseph A. Estrada

Please answer the following questions and submit them on the deadline date.
1. Why are changes in the prices of commodities very responsive to consumer
needs?
From what I have learned in the previous lessons, commodities are important
goods and services that are inelastic in nature when it comes to price because
consumers have little to no choice but buy commodities considering that they are
priorities to consumers. This effect causes another change in the price. Because the
demand for the commodity had little to no decrease considering how important they are
to customers, resources for these goods are also scarce, and with the political
upheavals present in our world, the price of the commodities will continue to rise. That is
why for me, it is rather more fitting to say that the changing prices and consumer needs
are a cycle because they precede each other.
The change in the prices of commodities is responsive to consumer needs and
consumer needs are also responsive to the changes in prices. The law of supply and
demand is heavily influenced in this scenario. Because the demand is maintained high
and the supply is low, the result will be an increase in price and this cycle goes on.
For example, in the Philippines, even if the price of rice went up, consumers may
opt to buy less rice but they will be less likely to not buy rice at all because they still
need it to ease hunger and survive. This is because rice is a commodity, especially in
the Philippines (Mamiit et al, 2021).

2. Is price discrimination considered a fair business practice? Why do companies

tend to sell the commodity to different buyers at different prices?
Companies use pricing discrimination to increase profits, according to Nickolas
(nd.). Price discrimination allows enterprises to give a high price to well-off consumers
and a low price to the most price-sensitive consumers in a broad market since a large
market often comprises many different sorts of consumers.
Price discrimination, according to Gordon (2021), is typically bad and frequently
unlawful since it generates unfair competition. He went on to say that distributing your
goods at a lower price to one store than another gives that retailer a market edge. The
merchant who pays the higher price will earn less profit or may be forced to raise its
pricing, which would affect customers.
Although many economists argue that it is unfair, some economists argue that it
is beneficial to customers as well. According to Pettinger (2019), price discrimination
can benefit customers by providing possibly cheaper rates and advantages for picking
less popular services, while also assisting the firm in remaining profitable and in
business. Some customers will value the benefits of price discrimination more than
others.
This might be a hot take but for me, I think that price discrimination is fair
because it creates a fair balance between the consumers that can afford the item at
cheaper prices and the consumers who can still afford products that are at higher
prices. At first, I only thought that price discrimination is morally wrong and unfair
because I only thought about the idea that prices differ on the types of consumers who
buy them, which translates to injustice. However, I realized later on that the effects of it
is beneficial. For example, if the price of a plane ticket stays the same all year for
everyone, persons with lesser incomes will be unable to purchase it. Similarly,
individuals with higher price points may stockpile it (Twin, 2022). This results in an unfair
advantage for those with higher price points and a disadvantage for those with lower
price points.

Sources:
Mamiit et al (2021) Productivity Hot Spots and Cold Spots: Setting Geographic Priorities
for Achieving Food Production Targets
https://www.frontiersin.org/articles/10.3389/fsufs.2021.727484/full#:~:text=Becau
se%20of%20its%20importance%2C%20rice,and%20affordable%20supply%20is
%20paramount.
Gordon, J. (2021) Why is Price Discrimination Harmful?
https://thebusinessprofessor.com/principles-of-marketing/why-is-price-discriminati
on-harmful
Pettinger, T. (2021) Benefits of Price Discrimination
https://www.economicshelp.org/blog/306/concepts/benefits-of-price-discriminatio
n/
Twin, A. (2022) What Is Price Discrimination, and How Does It Work?
https://www.investopedia.com/terms/p/price_discrimination.asp