Microeconomics- price discrimination Essay Example | Topics and Well Written Essays - 750 words

Microeconomics- value discrimination - Essay Example concord to microeconomics, companies usually charge higher damages to those consumers who have a higher consumer excessiveness or those who argon unbidden to pay higher. Higher consumer excess lubricate the process of increase in price and consumer with higher surplus do non resist to price hike. Similarly, by doing this Eskom would have increased its revenue as those consumers who are more likely to pay higher prices are being charged more. The reason why this surplus is higher for residential consumers than industrial consumers could be illustrated from our own experience. As residential consumers we have less immediate payment assets than industrial consumer who are bestowed with large cash balance. Hence, we find it more attractive to pay the increased price rather than changing the electricity supplier and compensable link charges as it would undertake both connection costs and time. Whereas, on the other hand indus trial consumer would resist to price change bestowed with large gold balance and in bid to remain competitive. (McConnell and Brue, 2001)Although, the policy of price discrimination might reduce the need of electricity but in doing so the firm will make sure that consumer who are paying more is provided more electricity to earn higher revenue. For example, if a same product is sold to contrastive consumers at different prices, then the company would make sure that consumers who are paying more are provided with commodity in order to maximize the companys revenue. In our case residential consumers are those who are paying more and hence will be provided more power supply. (Economist, 2008)Therefore, any price increase to industrial consumer would mean a customer is lost due to low consumer surplus for these users. This is a reason why Eskom charges higher prices to residential consumers than industrial consumer. Similarly, logic provides us with answer why Eskom does not charge bo th