Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -4 and group 2 has a price elasticity of demand of -6. If you could conduct third degree price discrimination, which group would you charge a higher price to? Why? Suppose the the profit maximizing price for group 2 is $36. What price should I charge group 1? Show all your work.
Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -4 and group 2 has a price elasticity of demand of -6. If you could conduct third degree price discrimination, which group would you charge a higher price to? Why? Suppose the the profit maximizing price for group 2 is $36. What price should I charge group 1? Show all your work.
Economics (MindTap Course List)
13th Edition
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Roger A. Arnold
Chapter23: Monopoly
Section23.5: Price Discrimination
Problem 3ST
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Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -4 and group 2 has a price elasticity of demand of -6. If you could conduct third degree price discrimination , which group would you charge a higher price to? Why? Suppose the the profit maximizing price for group 2 is $36. What price should I charge group 1? Show all your work.
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