DECA Marketing Cluster Practice Exam

What does price discrimination involve?

1. Charging the same price for all consumers

2. Offering discounts only to certain demographics

3. Selling the same product at different prices to different buyers

4. Setting a universal price for a product across all markets

The correct answer is: Selling the same product at different prices to different buyers

Price discrimination involves the practice of charging different prices for the same product or service to different consumers based on their willingness or ability to pay. This strategy allows businesses to maximize their revenue by capturing consumer surplus—essentially charging each customer what they are willing to pay. By tailoring prices to various segments of the market, companies can enhance sales volume and profit margins. For example, a movie theater may charge different ticket prices based on age demographics, such as lower prices for children and seniors, while charging full price to adults. This approach aligns with the concept of price discrimination, as differing consumers are charged varying prices for the same product, taking into account factors like demand elasticity and market conditions. The other choices do not embody the essence of price discrimination. Charging the same price for all consumers refers to uniform pricing rather than discrimination. Offering discounts only to specific demographics could be considered a limited form of pricing strategy but does not capture the broader practice of selling at multiple price points to different buyers. Lastly, setting a universal price across all markets completely contradicts the principle of price discrimination, which fundamentally relies on varying prices.