Practice Quiz

Praxis II: Economics Content Knowledge Exam Prep

Category - Economics

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The luxury clothing market is known to be especially vulnerable to economic recessions as people curtail spending on expensive non-essentials. Some luxury clothing retailers resort to selling these same goods at outlet markets in an effort to lure customers who are unwilling or unable to pay. This is an example of:
  1. First degree price discrimination
  2. Price stickiness
  3. Second degree price discrimination
  4. Demand-pull inflation
Explanation
Answer - A - This is an example of first degree price discrimination.

Key Takeaway: Price discrimination occurs when producers sell the same goods at different prices. First degree price discrimination occurs when customers are either unwilling or unable to pay for goods and services. This forces producers to offer price discounts in order to make the sales.
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