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4. Suppose the lab equipment is sold by a monopoly manufacturer. It sells to two types of consumers: medical (Type 1) and academic (Type 2).
4. Suppose the lab equipment is sold by a monopoly manufacturer. It sells to two types of consumers: medical (Type 1) and academic (Type 2). The lab equipment company identifies the following demands for its two differentiated consumers: P1 = 500 - Q1 P2 = 300 - Q2 The marginal cost to produce and sell the equipment is $50 regardless of consumer. a. Which consumer type can we say is the high-demand type? Which is the low-demand type? b. If the equipment company wanted to practice third-degree (group) pricing, what would be the per-unit prices for each consumer type? What would be the associated quantities for each type? c. Verify the expected relationship between the prices and elasticities of each consumer type. d. The demands in this problem can be shown to aggregate to the demand given in Problem #3. Suppose that the demand in #3 is representative of an average non-differentiated consumer in the market. Which strategy yields higher profit: group pricing (from this problem) or uniform pricing (from #3c)? What accounts for the difference? (Be sure to compare two differentiated consumers to two non-differentiated consumers.)
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