Market Income Hair Color Price Quantity Uniform Pricing Start with demand functions for each market: 1 High Light 10.4 8.5 Q;= A; - Pi 2 Low Light 10.0 6.5 3 High Light 16.2 6.0 Now add all demands in a group for a uniform price p: 4 High Light 10.5 8.3 5 High Light 9.5 9.8 Q = (Ap) 6 Low Dark 9.0 9.3 The inverse demand function is: 7 Low Dark 13.5 5.0 p = A-Q/N 8 High Dark 8.5 10.8 9 Low Dark 9.5 8.9 10 Low Dark 11.2 5.3 where N is the size (number of markets) of the group and A = (A)/N Pricing Separately Each Market 1. Set the optimal price for each market i (each row of the Excel Sheet) 2. Calculate profits and consumer surplus for each market 3. Add them up to get total profits and CS 4. Answer the questions in the Excel sheet, "Separate Market Pricing" tab Total Profits Consumer Surplus In what markets do consumers gain? In what markets do they lose? Pricing by Indicators 2 1. Set the optimal price for light and dark hair consumers. 1.1 Calculate total profits 1.2 Calculate total consumer surplus in each group (Need to calculate CS i for each market in the corresponding group and then add) 2. Repeat the same for Low and High income Hair Color Optimal Price Total Profits Light Dark Income Optimal Price Total Profits Respond by providing answers to the questions given in the "Pricing by Indicators" tab of the Excel Sheet. Low High 336 2 540 % Channge % Change % total profit increase relative to unform: % change in CS for Light Color: % change in CS for Dark Color: % total profit increase relative to unform: % change in CS for Low income: % change in CS for High income: