The correct answer is: B. Different elasticity of demand.
Price discrimination is a pricing strategy in which a company charges different prices for the same product or service to different groups of consumers. This is possible when the demand for the product or service is different in different markets.
If the demand for the product or service is the same in all markets, then the company will not be able to charge different prices without losing customers. This is because customers will simply buy the product or service from the market where it is being sold at the lower price.
However, if the demand for the product or service is different in different markets, then the company can charge different prices without losing customers. This is because customers in the market with the higher demand will be willing to pay a higher price for the product or service.
For example, a company that sells airline tickets may charge different prices for tickets to the same destination depending on when the ticket is purchased. Tickets purchased closer to the date of travel are likely to be more expensive than tickets purchased further in advance. This is because the demand for airline tickets is higher closer to the date of travel.
Price discrimination can be a profitable strategy for companies. However, it is important to note that price discrimination can also lead to consumer dissatisfaction. This is because consumers in the market with the higher price may feel that they are being treated unfairly.
In conclusion, price discrimination is possible and profitable when the two markets have different elasticity of demand. This is because the demand for the product or service is different in different markets, and customers in the market with the higher demand are willing to pay a higher price for the product or service.