{"id":22734,"date":"2025-06-16T21:38:12","date_gmt":"2025-06-16T21:38:12","guid":{"rendered":"https:\/\/gaviki.com\/blog\/?p=22734"},"modified":"2025-06-16T21:38:17","modified_gmt":"2025-06-16T21:38:17","slug":"if-the-japanese-demand-for-computers-is-elastic-and-the-canadian-demand-for-computers-is-inelastic","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/if-the-japanese-demand-for-computers-is-elastic-and-the-canadian-demand-for-computers-is-inelastic\/","title":{"rendered":"If the Japanese demand for computers is elastic and the Canadian demand for computers is inelastic"},"content":{"rendered":"\n

If the Japanese demand for computers is elastic and the Canadian demand for computers is inelastic, a profit-maximizing firm would charge a higher price to Canadian buyers than to Japanese buyers. True False<\/p>\n\n\n\n

The correct answer and explanation is:<\/strong><\/mark><\/p>\n\n\n\n

Answer:<\/strong> True<\/p>\n\n\n\n

\n\n\n\n

Explanation:<\/h3>\n\n\n\n

When a firm practices price discrimination<\/strong>, it charges different prices to different groups of consumers based on their price elasticity of demand<\/strong>.<\/p>\n\n\n\n

    \n
  • Price elasticity of demand<\/strong> measures how sensitive the quantity demanded is to a change in price.\n
      \n
    • If demand is elastic<\/strong>, consumers are very responsive to price changes. A small increase in price leads to a large drop in quantity demanded.<\/li>\n\n\n\n
    • If demand is inelastic<\/strong>, consumers are less responsive to price changes. Even a large increase in price leads to a relatively small decrease in quantity demanded.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

      In this scenario:<\/p>\n\n\n\n

        \n
      • Japanese demand for computers is elastic<\/strong>: Japanese consumers are very sensitive to price changes. If prices increase, the quantity they buy will drop significantly.<\/li>\n\n\n\n
      • Canadian demand for computers is inelastic<\/strong>: Canadian consumers are less sensitive to price changes. They will continue buying almost the same quantity even if prices rise.<\/li>\n<\/ul>\n\n\n\n

        A profit-maximizing firm uses this information to maximize revenue:<\/p>\n\n\n\n

          \n
        • The firm will charge a lower price in Japan<\/strong> to maintain sales volume since Japanese consumers are sensitive to price increases.<\/li>\n\n\n\n
        • The firm will charge a higher price in Canada<\/strong> because Canadian consumers are less likely to reduce their purchases when prices rise.<\/li>\n<\/ul>\n\n\n\n

          This pricing strategy allows the firm to extract more consumer surplus (the difference between what consumers are willing to pay and what they actually pay) from the less price-sensitive group (Canada) and maintain sales volume in the more price-sensitive market (Japan).<\/p>\n\n\n\n

          \n\n\n\n

          Why does this increase profits?<\/h3>\n\n\n\n
            \n
          • If the firm charged the same high price in Japan as in Canada, sales would drop sharply in Japan, reducing total revenue.<\/li>\n\n\n\n
          • If the firm charged the same low price in Canada as in Japan, it would lose potential profit because Canadian consumers would be willing to pay more.<\/li>\n<\/ul>\n\n\n\n

            By charging a higher price to Canadians (inelastic demand)<\/strong> and a lower price to Japanese (elastic demand)<\/strong>, the firm maximizes its total profit across both markets.<\/p>\n\n\n\n

            \n\n\n\n

            Summary:<\/h3>\n\n\n\n
              \n
            • Elastic demand \u2192 lower price to maximize quantity sold<\/li>\n\n\n\n
            • Inelastic demand \u2192 higher price to maximize revenue per unit sold<\/li>\n\n\n\n
            • Thus, the firm charges a higher price in Canada<\/strong> and a lower price in Japan<\/strong>.<\/li>\n<\/ul>\n\n\n\n

              Therefore, the statement is True<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

              If the Japanese demand for computers is elastic and the Canadian demand for computers is inelastic, a profit-maximizing firm would charge a higher price to Canadian buyers than to Japanese buyers. True False The correct answer and explanation is: Answer: True Explanation: When a firm practices price discrimination, it charges different prices to different groups […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-22734","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/22734","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=22734"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/22734\/revisions"}],"predecessor-version":[{"id":22735,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/22734\/revisions\/22735"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=22734"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=22734"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=22734"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}