Question

Theaters charge lower prices for a matinee and usually don't accept coupons for the night showing of movies because A consumers that attend the matinee have a higher price elasticity of demand B consumers that attend the night show have a lower price elasticity of demand C it increases profits compared to charging a single price D All of the above

Answer 1

D All of the above

Step-by-step explanation:

Price Elasticity of Demand is the responsive change in demand due to change in price. P.Ed = % change in demand / % change in price.

Price Elasticity of Demand :

• P.Ed is Elastic (>1) : if demand responds more to price change; % change in demand > % change in price.
• P.Ed is Inelastic (< 1) : if demand responds less to price change ; % change in demand < % change in price.

Consumer Surplus is the difference between, price paid by consumers & their maximum willingness to pay.

Price Discrimination is charging different prices from different customers. It implies charging more price from customers with less elastic demand, less price from customers with more elastic demand. This further maximises the profit, as firm is able to charge maximum - based on each customer's surplus.

Matinees are charged lower prices, implies they have high P(Ed). Night shows are not allowed coupons i.e higher price, implies they have low P(Ed). Price Discrimination in this way & leveraging maximum what each customer can pay, maximises profit - rather than single price profit.