You are the only pharmacist in a small town; the next closest drugstore is 50 miles away. The population in your town consists of young farmers and older retired families. You have noticed that the young farmers are less sensitive to price changes than the retired population. Specifically, you have found that the working population has an own price elasticity of demand of -2 and the retired farmers have an own price elasticity of -4. How can you use this information to your advantage?
This is the standard elasticity question of microeconomics. I use the same question in my intermediate microeconomics class.
Since the two groups of people have different ...
A standard elasticity question of microeconomics is solved.