21 Price Discrimination and Advertising

These flashcards cover key concepts related to price discrimination and advertising, providing definitions and understanding of important terms discussed in the lecture.

Price Discrimination

Selling the same good at different prices to different consumers.

Reservation Price

The maximum price a buyer is willing to pay for a good.

Producer Surplus (PS)

The difference between what producers are willing to accept for a good and what they actually receive.

Consumer Surplus (CS)

The difference between what consumers are willing to pay and what they actually pay.

Deadweight Loss (DWL)

The loss of economic efficiency that occurs when the equilibrium outcome is not achievable or not achieved.

Group Pricing

A method of price discrimination where different prices are charged to different groups.

Hurdle Method

Offering lower prices to buyers who are willing to overcome an obstacle.

Bundling

Selling different goods together as a package.

Search Good

A product that can be evaluated before purchase, typically through comparison shopping.

Experience Good

A product that must be purchased and used before its quality can be evaluated.

Effective Advertising

Advertising that successfully shifts and steepens the demand curve faced by a firm.

Market Structure

The organizational and other characteristics of a market affecting the level of competition and pricing.

Socially Inefficient Advertising

Advertising that is wasteful from society's perspective, where social costs exceed social benefits.