Purchase Solution

Price Elasticity and Price Discrimination

Not what you're looking for?

Ask Custom Question

You operate a small but popular and profitable restaurant/bar in a college town. There are several other restaurants and bars nearby. You have conducted a market research study and discovered that the price elasticity of demand for local residents is lower (less elastic) than the price elasticity of demand for college students, who are usually in town only while the college is in session about 9 months out of the year. Discuss at least two pricing strategies you can use to increase your revenues and analyze them in terms of their ability to generate additional profits. Indicate any additional assumptions you are making.

Purchase this Solution
Solution Summary

The expert discusses a scenario related to price elasticity of demand and appropriate pricing strategy for a restaurant.

Solution Preview

Since the price elasticity of demand for local residents is lower as compared to college students, restaurant can engage in price discrimination by charging a higher price from local residents and offering discounts to college students. Restaurant can offer college students ...

Solution provided by:
Sheetal Jain, PGDM
Education
  • BComm, University of Delhi
  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
Recent Feedback
  • "Thanks"
  • "Thanks"
  • "Very good! "
  • "thanks"
  • "Thank you!"
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

View More Free Quizzes
Related BrainMass Solutions

  • Price discrimination in case of patented products

    Even if we assume that firms can measure price elasticity of demand accurately and also control resale of products. Black market exchanges can also be a major obstacle in implementing price discrimination policies efficiently.

  • Optimal markups and prices

    The solution contains the determination optimal markups and prices under third-degree price discrimination using elasticity of demand and marginal cost.

  • Necessary condition for price discrimination

    578750 Price Discrimination Discuss the necessary conditions to make price discrimination work and the best practices to use price discrimination to maximize profits while avoiding price wars.

  • MCQ : Pricing Strategies

    Prestige pricing Price lining Skimming Incremental pricing Question 9 If the price elasticity of demand for bananas is -1.5 and the price elasticity of demand for grapefruit is -2.5, and the marginal cost of producing each of the items

  • Elasticity and Price Discrimination

    502598 Elasticity and Price Discrimination Elasticity and Price Discrimination: Evidence from Sam's Club and CVS An Example In a recent New York Times article, "Sam's Club personalizes Discounts for Buyers" (May 30 2010), the reporter Andrew Martin

  • Profit maximization using third-degree price discrimination

    Also, proof of the general relationship between pricing policy and price elasticity in markets where third-degree price discrimination can be practiced.

  • Step-by-step Answer to Price Elasticity

    374672 Price elasticity and discrimination Price Elasticity Briefly describe how knowledge of price elasticity among different groups of customers or for various products enable managers to price discriminate, or change different prices for these groups

  • Marginal Cost

    If it cost the coffe shof $0.02 to produce a coffee, the optimal price for a cup of coffee for senior citizens and resultant marginal cost under third-degree price discrimination are, respectively, A. $0.016 and $0.20 B. $0.02 and $0.80 C. $0.025

  • Calculating the optimal price and markup

    Group 1's elasticity of demand is -2, while group 2's is -3. Your marginal cost of producing the product is $30. a. Determine your optimal markups and prices under third-degree price discrimination.

View More Related Solutions