A deadweight loss will be incurred as a result and the social welfare is not maximised. To further maximise profit and increase the social welfare, the car park firm can implement price discrimination policy on the goods (available parking).
Price discrimination is based on the concept where different people will have different willingness to pay. At first degree price discrimination, the firm will charge individual consumers exactly the amount that they want to pay. As a result, consumer surplus would be virtually zero while producer surplus would be maximised and the society’s welling would also be maximised. Whilst first degree price discrimination is highly beneficial to firms, practically speaking it is very rare. In third degree price discrimination, the consumers are divided into different groups and charged different prices based on different generalisations on their willingness to pay. Students may be charged less for parking than adults, or the firm may offer business class parking with higher price than a standard economy class parking. Like first degree price differentiation, the firm is able to capture a larger number of consumers with lower willingness to pay. Leading to either an increase of the surplus of some consumers and a decrease for others when compared to when price discrimination is not implemented. Regardless of this variation, the …show more content…
In the past, sugar was considered to be an important but scarce commodity, one that only the rich and powerful could afford. Today, the advancements of technology combined with the increase of disposable income has resulted in an exponential demand for sugar. This demand is met with increased supply, and sugar related products is now used in almost all food related products. This over exposure of sugar, particularly in the form of sugary drinks, is damaging to the health of individuals, disrupts the economy, places a significant strain on the public health system and is detrimental to the environment.
Sugar in the case is a negative externality. The first externality occurs when the consumer does not fully appreciate the connection between health risks and the over-consumption of sugary (eg. Sugary drinks). Another externality is the financial externality, where the consumers do not fully bare the responsibilities of their decisions. For example, the total annual cost of obesity in 2008 was estimated to be $58 billion while the total social wellbeing was estimated to be $120