Price Discrimination: Concepts and Types

Price Discrimination: Concepts and Types â€Å"Please explain in details the concept of â€Å"price discrimination†, what are the different types of price discrimination. Explain with the use of examples.†   Ã‚   According to Phlips (1983, p.5) â€Å"the more one thinks about price discrimination, the harder it is to define.† Phlips (1983, p.6) suggests that price discrimination should be defined as† implying that two varieties of commodity are sold (by the same seller) to two different buyers at different net prices, the net price being the price (paid by the buyer) corrected for the cost associated with the product differentiation†. Another definition of price discrimination is â€Å"where a firm sells the same product at different prices† (Sloman, 2006, g.13). Geographical location, gender, race, age and income are some of the aspects in which discrimination among buyers may be established. In order for price discrimination to work, businesspeople must be incapable of buying goods at the lower price and reselling them at a much higher cost. The firm or company must have to some extent, monopoly power and firms must be capable of classifying domestic and industrial consumers (Economicsonline.co.uk, 2014). Laws against price discrimination have pursued to hinder its use by one business retailer driving out another competitive seller â€Å"bankrupt† by depreciating the rival in his own market, whereas retailing at a higher cost in other markets. (Encyclopedia Briticanna, 2014). There are three types of price discrimination. These are: first-degree, second-degree and third-degree price. According to Dwivedi (2006), the first-degree (also known as perfect price discrimination) is considered the â€Å"discriminatory pricing that attempts to take away the entire consumer surplus†. Investopedia (2014) defines consumer surplus as a form of economic strategy used to evaluate customer satisfaction. This is analyzed by exploring the difference between what customers are prepared to pay for each and every single good / service comparatively to the market price. Dwivedi states therefore, that only when the seller discerns the precise amount that a buyer is willing to pay for an item, (buyer’s demand curve) will first-degree price discrimination be deemed as successful. But how will the seller know this information? Dwivedi states that firstly the seller initiates the highest buying price that consumers are ready to pay (some may be willing to pay an elevated price while others at a lower price) and buy at minimum a unit of a product. Only when the consumer surpl us of this segment of customers is used up, the seller then progressively lowers the price so that consumer surplus of the buyers regarding the subsequent products can be obtained. An example of first-degree price discrimination provided by Cabral (2000, p. 170) is that of a doctor providing health care in a small town and who has ample information of all the people living in the town, particularly their financial status. Acting on this information, the doctor analyzes the client willingness to pay each fee and sets a suitable price. Another example provided by Cabral, is by aircraft. While certain manufacturers publish a list of fees for each airliner, in actuality each airline shells out a different cost for each aircraft. The graph image below shows a monopoly representation of the first-degree price discrimination. MC (marginal cost) and ATC (average total cost) are the regular curved shapes with MC traversing through the minimum point on the ATC curve. The solid line that slopes downwards represents the firm facing the market demand curve, which is identical to the firm’s demand curve, (D = d). The marginal revenue relates to the firm’s demand curve, (d = MR) since the company expenses every customer the highest price he / she is ready to make. At the output level, profit maximization happens; matching to MR equals marginal cost. Plast represents the price for each and every last unit of product sold. Subsequent units have a higher price. The end profit for the company adds up to the profits received for every unit subtracted from the ATC per unit (ATC0). The shaded area displays the total profit earned since the price for every unit is the highest price as established from the demand curve. Graham (2013). According to Mukherjee (2002), second-degree price discrimination is where prices vary depending on the amount of output bought by each consumer. This is also known as â€Å"volume discounting†. The seller incurs a higher â€Å"per-unit† cost for the lesser units sold while for the larger amount of product are sold at a lesser per-unit cost. Similar to the first-degree price discrimination, the company will result at a quantity of output where the marginal costs are covered by the prices charged. The objective of the seller is to draw out not the entirety of the consumer surplus, but just some of it as profits along with a remaining surplus. Ruby (2003). An example of this type of discrimination is the different prices charged for different sizes of cereal. Another example of this type of discrimination is the discounts found in stores; for instance a shoe store would advertise a list of shoes that qualify for the discount, where if a customer purchases one pair of shoes the other one would immediately grant that he/she gets a discount off the other pair of shoes. The illustration below represents a graph of second-degree discrimination. Ruby from digitaleconomist.org, utilizes an example of a company charging a variation of three prices for one item. He points out that if a user decides to purchase Q0 units then the cost P0 is charged for each unit of the good. For a larger quantity Q1 a lower charge P1 is made and for quantity Q*2 the price P2 is charged. â€Å"(the level of output such that P2=MC (Marginal Cost)† The third-degree price discrimination occurs where a firm is capable of dividing its consumers into different markets and charging different prices. Or in other words, charging different fees to each customer class. Each market is distinguished by exceptional â€Å"demand† characteristics. It is noted by Ruby that some of these particular markets may be â€Å"less† price sensitive in correspondence to others where the quantity demanded is more â€Å"sensitive† to cost alteration. This form of discrimination is very similar to second-degree price discrimination. An example provided by Managerial Economics, Hirschey (2009), is that a bus company may incur a lower fee and apply this type of price discrimination towards senior / aged people, as well as the disabled / handicapped individuals. This will therefore benefit these particular customers, providing a great service to ride the bus. Due to the increase of revenue earned from these passengers, the bus company may provide additional services such as going off route (routes that could not be maintained by the income from those full-fare customers only or it may be capable of functioning with a lesser taxpayer subsidy. References Phlips, L. (1983).The economics of price discrimination. Cambridge [Cambridgeshire]: Cambridge University Press. Sloman, J. (2006) Economics, (6th Ed). Prentice Hall/Financial Times. Economicsonline.co.uk,. (2014). Price discrimination. Retrieved 15 September 2014, from http://www.economicsonline.co.uk/Business_economics/Price_discrimination.html Price discrimination. (2013). Encyclopà ¦dia Britannica. Encyclopà ¦dia Britannica Ultimate Reference Suite. Chicago:Encyclopà ¦dia Britannica Dwivedi, D. (2006).Microeconomics: Theory And Applications.(1st ed.). 327. New Delhi: Pearson Education. consumer surplus. (2014). Investopedia.com – Your Source For Investing Education. Retrieved September 15th, 2014, from Investopedia.com: http://www.investopedia.com/terms/c/consumer_surplus.asp Cabral, L. (2000). Introduction to Industrial Organization.(1st ed.) Cambridge, Mass. MIT Press. Graham, R. (2013). Managerial Economics For Dummies. (1st ed.). [Graham, R. Graph of First Degree Price Discrimination]. Retrieved September 15th, 2014, from: http://www.dummies.com/how-to/content/basics-of-firstdegree-price-discrimination-in-mana.html Mukherjee, S. (2002). Modern Economic Theory. (4th ed.). New Age International. Ruby, D. (2003). Price Discrimination. Retrieved September 15th, 2014, from: http://digitaleconomist.org/pd_4010.html [Ruby, D. Graph of Second Degree Price Discrimination]. Retrieved September 15th, 2014 from: http://digitaleconomist.org/pd_4010.html Hirschey, M. (2009). Managerial Economics. (1st ed.). Mason, OH: South-Western Cengage Learning.

Purchase Orders

ABC Instructor Assignments 1. Ken's Carpets sells carpet for both residential and business use. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $300,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined: Activity| Allocation Base| Proportion of Overhead Cost| Purchasing| Number of purchase orders| 25%| Materials processing| Number of square feet| 50%| Sales| Number of sales orders| 25%|The number of activities for residential and business is as follows: | Residential| | Business Total Total Overhead| Number of purchase orders| 700| | 500 1,200 75,000| Number of square feet| 4,000,000| | 2,000,000 6,000,000 150,000 | Number of sales orders| 400| | 100 500 75,000| Required: A. | Calculate the total overhead that should be allocated to each of the three activities. Number of Purchase $75,000, Number of square feet $150,000, Number of sales orders $75,000. | | B. | Calculate the overhead rates for each of the three activities. Number of purchase 62. 5, Number of square feet 0. 025, Number of sales orders 150| | | C. | If a particular residential job requires 4 purchase orders and 1 sales order for total of 1,500 square feet of carpet, how much overhead should be allocated to the job? 4*62. 5 + 0. 025*1,500+1*150 = $437. 50| 2. Mountaineer Tents manufactures and sells heavy and light duty tents to various outdoor retailers. To better estimate costs, the company recently adopted an activity-based costing system.Last year, the company incurred $900,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined: Activity| Allocation Base| Proportion of Overhead Cost| Purchasing| Number of purchase orders| 55%| Inspections| Number of inspections| 20%| Sales| Number of sales orders| 25%| The number of activities for heavy and light duty tents is as follows: | Heavy-duty| | Light-duty| Number of purchase orders| 5,000| | 4,000| Number of inspections| 3,000| | 1,000| Number of sales orders| 800| | 400| Required:A. | Calculate the total overhead that should be allocated to each of the three activities. Number of purchase 4,950, Number of inspection 800, Number of sales 300| | | B. | Calculate the overhead rates for each of the three activities. Number of purchase 1. 82, Number of inspection 5, Number of sales 4| | | C. | If a single sales order requires 10 purchase orders and 30 inspections to fill, how much overhead should be applied to the order? 1*4+10*1. 82+30*5 = 191. 82| 3. The following overhead cost information is available for Millennium Inc. for 2006: Activity| Allocation Base| Overhead Cost|Purchasing| Number of purchase orders| $300,000| Machine setups| Number of setups| 150,000| Quality control| Number of inspections| 50,000| During the year, 4,000 purchase orders w ere issued; 8,000 machine setups were performed; and 2,000 inspections were conducted. Required: A. | Calculate the overhead rates for each of the three activities. Purchasing 75. 00, Machine Setups 18. 75, Quality Control 25| | | B. | If a particular job requires 10 purchase orders, 6 setups, and 5 inspections to fill, how much overhead should be applied to the job? | 10*75+6*18. 75+25*5 = 987. 5

How does Flaubert use the Agricultural fair at Rouen to further his satire of 19th century French society?

Gustave Flaubert wrote his novel Madame Bovary in the mid-nineteenth century as a satirical comment on the upper middle class, those who were just rich enough to pretend to be rich. Flaubert loathed them and wrote his novel to make them appear as the fools that he thought them to be. His loathing for the upper middle class of 1850's France stemmed from the ideals which they held. Flaubert saw his fellows as a generation lost to the meritless and frivolous dreams of the French Romantic movement. French Romanticism was a movement through all the creative arts towards idealising the world which artists constructed. Although equally present in music and visual art, Flaubert focused both his hatred and his satire on the literature of the time, this reactionary nature earned him the title of a â€Å"naturalist†. This was however something that Flaubert hated; the Naturalistic movement was one that focused on specifics and on realism in a work, whereas Flaubert sought to make his story one that was applicable to any setting. Though his attention to detail in places mirrors that of a realist or naturalist writer, this is not his essential purpose. Flaubert defies any attempt to fit his work to a particular movement or style in French literature, though there is little doubt that his work Madame Bovary is a reactionary satire of French romanticism and of the bourgeois society that regurgitated the clichà ¯Ã‚ ¿Ã‚ ½s of the movement. Each word in the novel is carefully chosen, so the book becomes a painstakingly constructed trap which ensnares the thoughts of the reader and guides them to the conclusions that Flaubert wants us to make. Although every word in the novel is vital to Flaubert's purpose, there are certain key passages that are particularly pivotal to the book. Among these is his description of the agricultural fair at Rouen in Part II Chapter 8. One section of this describes a conversation that occurs between Rodolphe and Emma in the provincial fair that surrounds it. The passage begins with a monologue from Rodolphe: what he expresses in the passage is a fairly clichà ¯Ã‚ ¿Ã‚ ½ set of ideals from the romantic movement. He talks of â€Å"Striving souls† and â€Å"beating hearts† . Particularly typical is the idea of two souls matched by fate that cannot be drawn apart. However despite the words of the text the tone is not one of romance. Flaubert intentionally marrs Rodolphe's words by introducing them with the sentence: â€Å"Rodolphe had moved in closer to Emma, he was talking in a low voice, speaking rapidly† This has the effect that Rodolphe appears to be making a clumsy attempt to seduce Emma, rather than simply expressing noble sentiments. Another tool that Flaubert uses to make the entire situation still more comedic, is by consistently contrasting the everyday provinciality of the agricultural fair with the frivolous fantasies in which the two â€Å"star crossed lovers† engage. This is used consistently throughout the passage, but it makes its first appearance in introduction to this section: Flaubert talks of bleating lambs and cattle, then suddenly Rodolphe says: â€Å"Don't you find this social conspiracy revolting? Is there one sacred feeling that they do not condemn?†. This adds to the reader's feeling that Rodolphe and Emma are completely in a world of their own with little or no connection to the reality of the bovine conspirators. The reader should note the over-punctuation which creates a disjointed tone: Oh! Come what may, sooner or later, in six months, ten years, they will be together, will be lovers, because Fate ordains it, because they were born for one another. Flaubert runs the entire monologue into a single paragraph. This has the effect that we are left with the impression of a clumsy attempt at seduction muttered quickly under the breath. In the next paragraph Flaubert describes the sensations that Emma feels. He writes of Emma's observations of Rodolphe. Ironically much of the passage is devoted to describing the smell of Rodolphe's pomade and to the fresh scent of the ivy climbing a nearby house, but one can only imagine the onslaught of odours that would campaign against ones nostrils in a rural agricultural fair. Flaubert's writing here mimics that of French Romanticism, his style is an exaggeration of the literary genre that he seeks to mock. This is perhaps also a reflection of the feelings that Emma wants to have as much as the feelings that she does have. The next paragraph contains the concluding section of the Councillor's speech. One should note the immediate change: Emma has been lost to the scent of Rodolphe's hair, and then suddenly the councillor shouts out â€Å"Endurance! Perseverance!†, ideals which are in stark contrast to Emma's thoughts of desire. This serves to make Emma appear petty, concerned only with those matters that are emotive and frivolous. Flaubert makes another sly stab here, this time at the church. Endurance! Perseverance! Heed neither the voice of habit, nor the over-hasty teachings of rash empiricism! Dedicate yourselves above all to the improvement of the soil, to good manure, to the development of the various breeds, equine, bovine, ovine and porcine. If one reads the opening sentences from the Councillor's speech it becomes clear that his manner of oration is based on the stereotype of a â€Å"hellfire and damnation† preacher: the resemblance can perhaps be most clearly seen in the way he cries out virtues, and in â€Å"Heed neither the voice of habit, nor the over-hasty teachings of rash empiricism† a sentence that is quite biblical in its construction if not in its subjects. This is certainly a caricature of an evangelical preacher. This impression is aided by the Councillor's introduction: â€Å"†¦she could hear†¦ the voice of the councillor psalming out his phrases† Mimicking the style of a over-zealous padre serves to mock the church by imitation. Applying this same manner of speech to such a mundane topic as agriculture rather than religion serves to demystify it, making it appear comical. Lieuvain then dismounts his pulpit and is replaced by another speaker. Flaubert takes the opportunity of introducing the new orator to contrast the trivial nature of Rodolphe and Emma's discourse with the profound speech of Monsieur Derozerays. This is done by contrasting pairs of sentences throughout the paragraph, alternating between describing the lovers' conversation, and describing the speech. This technique begins thus: Accordingly, praise of the government played a lesser role; religion and agriculture were rather more in evidence†¦ Rodolphe, with Madame Bovary, was talking dreams, premonitions, magnetism. We now move a little lower on the page and find a similar contrast: †¦Cincinnatus at his plough, Diocletian planting his cabbages and the emperors of China bringing in the New Year by planting seeds, the young man was explaining to the young woman that these irresistible attractions had their origin in some previous existence†¦ Flaubert clearly wants to make a mockery of the whole situation. He is trivialising these matters of the heart by comparing them to the hardworking people of the fields, where the labourers are planting seeds for the New Year. Flaubert continues to alternate between describing the speech and describing the seduction. The contrasts between the two begin subtly but as we continue down the page they grow less and less so. By the time we reach the bottom of the page Flaubert has begun to intermingle the words of Rodolphe, speaking of love and destiny and of all the ideals of French romanticism and Derozerays, who talks of money of work and of that which is concrete and substantive: – Did you know that I would be escorting you? – Seventy francs!3 – A hundred times I wanted to leave, and I followed you, I stayed. – Manures! – As I shall stay this evening, tomorrow and the day after, all my life. Flaubert's purpose in this entire extract is to satirise the seduction. More importantly, it is to show that the ideals that are shared by the Bourgeoisie and the Church concern matters that are emotive and are therefore trivial compared to those things concrete such as land, money and food. Flaubert trivialises the entire Romantic genre by setting a clichà ¯Ã‚ ¿Ã‚ ½d romantic conversation, that proliferates with the language and metaphors that permeate the literature that he is satirising. He then places this exaggeration of the Romantic movement into a situation that is overwhelmingly provincial and agricultural. This serves his purpose of mocking the petty bourgeoisie and the Romantic movement.

Are Cell Phones Dangerous to Your Health - 1504 Words

The number of mobile phone subscribers in the Philippines has soared from over 22.5 million in 2003 to over 57.3 million in 2007. It continues to rise daily at a very fast clip, allowing us to maintain our dubious claim as the text capital of the world. On the other hand, statistics in the United States show just how deeply ingrained cell phones have become in people’s lives: Fully 78 percent of all American adults own them, including 86 percent of 18- to 29-year-olds and 55 percent of those who are 65 and older. Overall, it is estimated that there are three billion cell phone users in the world. Each time a cell phone user makes a call, it emits a low level of radiofrequency energy as the phone’s antenna generates radio waves that†¦show more content†¦Adults should keep the phone away from their heads and use the speaker phone or a wireless headset, he said. He also warned against using the cell phones in public places such as a bus because it exposes others to the phone’s electromagnetic fields. The Other Side In fact, other than the University of Pittsburgh, no other major academic cancer-research institution has sounded the same alarm about cell phone use. And certain members of the scientific community took exception to Herberman’s advice, â€Å"It’s important to not confuse exposure with risk,† says Peter Inskip of the NCI. Otis Brawley, chief medical officer of the American Cancer Society (ACS), says, â€Å"The University of Pittsburgh exaggerated the risks. They were unnecessarily scaring people. Most of the scientific community was wondering what Herberman, with no expertise, was doing.† For example, the NCI’s data show that overall, brain tumor rates have been steady. From 1987 to 2005, the rate of brain cancer has not increased despite the increase in cell phone users, from 110 million in 2000 to 208 million in 2005. 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