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Key Concept: Price discrimination Suppose there are two markets for college football games, and each market contains the same number of potential consumers. The first market consists of rich alumni, and the second market is made up of low-income students. Based on this information, which group will be charged a higher price for football tickets? a. students. b. Alumni. c. Students and alumni will be charged equal prices. d. Cannot be determined.

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Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040

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BuyFindarrow_forward

Economics For Today

10th Edition
Tucker
Publisher: Cengage Learning
ISBN: 9781337613040
Chapter P3, Problem 7KC
Textbook Problem
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Key Concept: Price discrimination

Suppose there are two markets for college football games, and each market contains the same number of potential consumers. The first market consists of rich alumni, and the second market is made up of low-income students. Based on this information, which group will be charged a higher price for football tickets?

  1. a. students.
  2. b. Alumni.
  3. c. Students and alumni will be charged equal prices.
  4. d. Cannot be determined.

To determine

The price discrimination of the football market.

Explanation of Solution

The market is the place where the buyers and sellers interact with each other and the exchange of goods and services take place between them at a mutually agreed price level in the economy. The prices in different markets will be different.

Option (b):

The price discrimination is the practice of charging different prices from different consumers for the exactly same commodity. Since the alumni market is rich consumer market, they would be willing to purchase football games at any price offered. This indicates lower price elasticity of the group compared to the students who are low-income consumers. The lower income group of consumers will react more than the rich consumers. This means that option 'b' is correct.

Option (a):

The students are not the wage earners and thus, they are the low-income consumers...

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