at higher average unit prices,while those with lower demand prices will more often purchase thelarger quantities at a lower unit cost. Second degree pricediscrimination generally leads to a situation where more quantity perunit is sold. Sam's Club is the 2nd degree price discrimination heaven. Mr. Walton's little warehouses across the land clearly aim for aconsumer that is willing to buy more at a lower price per unit. Finally,2nd degree price discrimination yields itself well to a process called"product bundling". Product bundling is more common in the personalcomputer industry. System packages are bundled together with themost popular software and hardware, and this reduces possible arguingover certain items. No one can argue about the value of not including aCD-ROM or video card. Third degree price discrimination deals withseparating customers into distinct groups based upon their differencein elasticity of demand. Based upon this elasticity, you then charge ahigher price to the group whose demand is less elastic. Marginalrevenue is the change in the total revenue that is the result of a smallchange in the sales of the good in question. Therefore, price must alsohave to change slightly. Opportunity Cost Price discrimination isbased upon the most significant of all economic concepts: opportunitycost. For example, American Airlines may offer college students a farefrom Saint Louis to Chicago for $149 round-trip, while "business class"fares run significantly higher, say $279 for example. The businesstraveler, is more willing to pay the higher fare because he or she isgoing to be working for a client in Chicago and will be paid $100 perhour while there. The college student does not have the luxury ofhaving any extra money, and therefore cannot see paying the higherrate to travel to Chicago for his or her break. Opportunity cost is themost essential measure of justification for any person's given resources,including (but not limi...
