DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : A.Satya Vani Kumari
Designation : Lecturer
Branch : Commercial & Computer
Practice
Institute : Govt. Poly. For Women,
SURYAPET.
Year/Semester : III Year / V Semester
Subject : Business Economics –I
Subject Code : CCP-502
Topic : Markets
Duration : 50 Mts.
Sub Topic : International price discrimination
(Dumping) .
Teaching Aids : power point, animation

CCP-502.68 1
Objectives

On completion of this period you would be able to

 Explain Dumping (International Price Discrimination)

 List Objectives of Price Discrimination

 Substantiate Social justification of price discrimination

CCP-502.68 2
 Review

In the previous class we have discussed about:

 Conditions necessary for price discrimination

 When price discrimination is profitable

 Determination of price & output under Discriminating

Monopoly

CCP-502.68 3
What do you call large scale price discrimination
under Monopoly?

CCP-502.68 4
Dumping

 Practice of discriminatory monopoly in the area of

foreign trade is known as Dumping.

 “charging higher prices in the home market and

lower price in the foreign market for the same
product”.

CCP-502.68 5
The rationale behind Dumping is :

 To enable the exporter to compete in the foreign

market

 To capture the market by selling at a lower price

 To increase export earnings

 To minimize the risks involved in foreign

investments etc

CCP-502.68 6
 The success of international price discrimination
depends on the following conditions.

 The producer must possess monopoly power at least

in the home market.

 There must be clearly defined separate markets.

 It should not be possible for the customers to resell

the product in the high priced market.

CCP-502.68 7
 Different markets should have different elasticities
of demand.

 Price & output are determined under Dumping just

like in Discriminatory Monopoly.

CCP-502.68 8
Objectives of Price Discrimination
 To maximize monopoly profits

 To capture new markets

 To keep hold on export markets

 To convert consumer’s surplus into producer’s profits

CCP-502.68 9
 To exploit the unutilised capacity of the firm

 To clear off the output

 To increase the future sales by charging lower prices

 To destroy a rival firm

CCP-502.68 10
 A particular price discrimination is good or bad
depends on various economic and normative
considerations.

 So, impact of price discrimination differ in different

cases.

CCP-502.68 11
Price Discrimination is beneficial to the society in
the following ways:
1. More wants are satisfied with more production.

2. Due to large scale production, economies of scale

can be derived, which reduces average cost of
production.

3. More employment can be created.

CCP-502.68 12
4. Discriminatory prices are somewhat lower than
single monopoly price.

5. Provides an opportunity to compensate the loss in

one market by the profit in another market which
encourages the producer.

CCP-502.68 13
6. Provides an opportunity to charge nominal fee for
poor people.

Finally, we can conclude that when the poor

people who get benefit from price discrimination is
more than the rich who will be charged higher
price, then price discrimination is beneficial to the
society.

CCP-502.68 14
DUMPING IS ALSO JUSTIFIED BECAUSE:

1. When it increases the market to a larger extent.

2. Large scale economies minimizes average cost.

3. In the absence of dumping, the domestic consumers

have to pay more under simple monopoly.

CCP-502.68 15
Price Discrimination is not Justifiable in the following
cases:

1. When the monopolist aims at maximization of personal

profits depending on the position of elasticity of demand
in different markets.

2. When it is ink favour of rich consumers only.

CCP-502.68 16
3. When the net social benefit is zero or negligible.

4. When Dumping is resorted to widen the foreign

market and exploiting the home buyers.

CCP-502.68 17
Summary

In this class we have discussed about

 Dumping

 Objectives of Price Discrimination

 Whether price discrimination is socially justifiable or not

CCP-502.68 18
Quiz

1. Having more domestic price and less foreign price for

the same product is called _______
a) Monopoly
b) Perfect competition
c) Dumping
d) Oligopoly
Ans: C

CCP-502.68 19
Frequently asked questions

1. Write a short note about Dumping.

2. Discuss whether price discrimination is beneficial to

the society or not.

CCP-502.68 20