You are the owner and operator of Les Voyageurs, a gift shop that caters mostly to the tourists in the Old Port of Montral. You have estimated the monthly demand equations for the busy summer season and the slow winter season to be:

P = 100-0.1Q

(High season)

P = 500.1Q

(Low season)

Your fixed costs average $10,000 each month and your average unit cost of goods sold is approximately $20 per item. Based on this information answer the following questions.

a) On the same diagram draw the demand and MC curves for both the high and low seasons using quad paper.

b) Calculate algebraically the optimal quantity and price to maximize profit in each season applying a single-price policy toward your customers. What would be your TR, TC and I in each season?

c) Instead of charging a different price in each season (differential-price policy) you charged the same price throughout the year (uniform price policy). Determine your demand equation that applies throughout the year and calculate the quantity and price that will maximize your profit. What would be your TR, TC and I this time?

d) Calculate the TR, TC and I for both seasons and compare it to your TR, TC and if you charged the same price throughout the year. Does dynamic pricing make a difference to your total profit? Is dynamic pricing a form of price discrimination?