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In Each of the Two Cases Below, Why and How

question 44

Essay

In each of the two cases below, why and how does the firm choose to separate its customers into two markets?
a) A hotel in the city centre offers weekend room discounts.
b) Plastic surgeons charge their lower- income patients less than their rich patients for similar operations.


Definitions:

Invisible Hand

A metaphor introduced by Adam Smith to describe the unintended social benefits of individual self-interest actions.

Free Market

An economic system in which prices for goods and services are determined by the open market and consumers, where the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.

Free Trade Advocates

Individuals or groups who support the removal of trade barriers between countries to facilitate the exchange of goods and services.

Adam Smith

An 18th-century Scottish economist and philosopher, best known for his book "The Wealth of Nations," which laid the foundations for classical economics and modern capitalism.

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