Answer the following question.
Discuss briefly the meaning of "Price discrimination" and "Product differentiation" with the help of suitable examples.
Price Discrimination -
Price discrimination implies charging different prices for the same product from different buyers at the same time. A monopolist firm enjoys the freedom to follow price discrimination. That is, in other words, it can sell the same product to different buyers at different prices at different time periods. For example, a monopolist charge the maximum price that each buyer is willing to pay.
Product Differentiation -
Differentiated Products imply that the products are similar to each other and perform the same basic function yet are different from each other in some or the other manner. The products are hypothetically differentiated from each other by the producers through advertisements. Take the example of shampoos.
Although the basic function of a shampoo is to clean the scalp but the producers try to differentiate their respective brands by highlighting some unique features such as anti-dandruff, anti-hair fall, protein-rich shampoos, hair root-strengtheners, etc.
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