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Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -3 and group 2 has a price elasticity
Suppose you can separate consumers into two groups: Group 1 has a price elasticity of demand = -3 and group 2 has a price elasticity of demand of -9. If you could conduct third degree price discrimination, which group would you charge a higher price to? Why? What would be the relative price of group 1 to group 2? Suppose that the profit maximizing price for group 2 is $12. What price should I charge group 1? Show all your work.
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