Suppose the price elasticity of demand for movies by teenagers is 0.2 and that by adults is 2.0. What policy would the movie theatre implement to increase total revenue? Make up some data to illustrate your answer© BrainMass Inc. brainmass.com October 10, 2019, 3:25 am ad1c9bdddf
Because the theatre has two groups with different elasticities that they can differentiate based on age, they have the ability to price discriminate.
Price discrimination is when a firm charges one person or group of people a different price based on how much they are willing to pay. This allows them to sell to more people than they otherwise would be able to and increase profits.
This solution uses hypothetical data to explain the concept of price elasticity and suggest a profit maximizing price for the theatre.