Eco 100

In: Business and Management

Submitted By mailbox4me
Words 1224
Pages 5
1. You own a local sub shop in a college town. You primarily serve two groups of people: local residents (both students and other local residents) and visitors to your town. Devise a price discrimination strategy that will increase your revenues compared to a single-pricing strategy.
An article in Britannica Encyclopedia explains that Price discrimination takes place when a company charges a different price to different groups of customers for an identical good or service. In order for the price discrimination to work, there must be a different price elasticity of demand from each group of consumers. Then the company is able to charge a higher price to the group of consumers with a more price inelastic demand and a comparatively lower price to the group with a more elastic demand. By implementing this strategy, I can increase my profit. For price discrimination to succeed, other industrialists must be unable to obtain goods at the lower price and resell them at a higher one. I would set my price discrimination by setting one price for lunch time and offering lunch specials and setting another price for dinner time. This would help keep my customer from college and the surrounding area as well as the visitors who would be looking to eat out during dinner time. (Britannica Concise Encyclopedia. (1994) 2. Suppose the cable TV industry is currently unregulated. However, due to complaints from consumers that the price of cable TV is too high, the legislature is considering placing a price ceiling on cable TV below the current equilibrium price. If the government does make this price ceiling law, diagram and explain the effects with supply and demand analysis. If the cable TV company is worried about disgruntling customers, suppose that the company may introduce a different type of programming that is cheaper for the company to provide yet is equally appealing…...

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