managerial economics and globalization |Quick homework help

The idea that transactions in a marketplace work like an invisible hand is to some extent the idea that when a person chooses to buy an item at a given price, they are happy with the deal. There is no coercion. If the person really does not like the deal, they simply walk away.

This week’s discussion will give you an opportunity to explore direct and indirect price discrimination within the context of a hypothetical scenario.

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Also see the help provided in the discussion preparation.

Instructions

For this discussion, use the following hypothetical scenario as the basis for your response:

• Your business partner is strongly opposed to your proposal to charge your largest customers lower prices for your web-based services than what you charge your smaller customers. She is arguing it is unethical, unfair, and possibly illegal.

Address the following in your discussion post:

• Make a case that both groups of customers will be satisfied with the deal and that this is a perfectly legal form of pricing in a business-to-customer relationship.
  • What degree is this type of price discrimination?
  • How will the plan increase revenue?
  • Why will both groups of customers be satisfied with the deal?
  • Why is this a legal form of pricing?
• Use evidence from your textbook or other reputable sources, including any help in the discussion preparation, to support your case to your business partner.

SOLUTION

The “invisible hand” concept in economics, as popularized by Adam Smith, refers to the idea that individual self-interest in a market-driven economy leads to unintended benefits for society as a whole. Transactions in a marketplace are based on mutual consent, with each party voluntarily participating because they believe they are getting a fair deal. If they don’t like the deal, they have the option to not participate, and this creates competition and drives prices and quality towards what people are willing to pay for.