In the airline market, vacation-traveler customers have a more elastic demand than business-traveler customers, although the marginal cost of serving either type of customer is the same. If the airline companies engage in price discrimination, which customers end up paying a higher price? Vacation-traveler customers. Prices will be the same because the marginal costs are the same. There is not enough information to answer. We also need to know the average cost of serving each type of customer. Business-traveler customers.
QUESTION 2
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In the airline market, vacation-traveler customers have a more elastic demand than business-traveler customers, although the marginal cost of serving either type of customer is the same. If the airline companies engage in
price discrimination , which customers end up paying a higher price?Vacation-traveler customers.
Prices will be the same because the marginal costs are the same.
There is not enough information to answer. We also need to know the average cost of serving each type of customer.
Business-traveler customers.
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QUESTION 3
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A seller engages in price discrimination by market segment. Morning customers have a price elasticity of demand E = -2, while evening customers have a price elasticity of demand E = -3. The MC of selling to both groups is the same and constant at $100. Therefore:
morning customers will pay P=$400, while evening customers will pay $300.
morning customers will pay P=$400, while evening customers will pay $150.
morning customers will pay P=$200, while evening customers will pay $150.
all customers will pay $100.
morning customers will pay P=$200, while evening customers will pay $300.
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