2. GMG, a cinema complex, is considering charging a different price for the afternoon showings of its films compared with the evening ticket price for the same films. It has estimated its afternoon and evening demand m functions to be: PA8.5 -0.25QA PE12.5-0.4QE Where PA and PE are ticket prices (in) and QA and QE are number of customers per week (in hundreds). GMG has estimated that its fixed costs are 2,000 per week, and that its variable costs are 50 pence per customer. REQUIRED: Calculate the price that GMG should charge if it does not use price discrimination, assuming its objective is to maximize profit. 11. Calculate the prices that GMG should charge if it does use price discrimination. 122. Calculate the price elasticities of demand in the case of price discrimination. iv. How much difference does price discrimination make to profit?
2. GMG, a cinema complex, is considering charging a different price for the afternoon showings of its films compared with the evening ticket price for the same films. It has estimated its afternoon and evening demand m functions to be: PA8.5 -0.25QA PE12.5-0.4QE Where PA and PE are ticket prices (in) and QA and QE are number of customers per week (in hundreds). GMG has estimated that its fixed costs are 2,000 per week, and that its variable costs are 50 pence per customer. REQUIRED: Calculate the price that GMG should charge if it does not use price discrimination, assuming its objective is to maximize profit. 11. Calculate the prices that GMG should charge if it does use price discrimination. 122. Calculate the price elasticities of demand in the case of price discrimination. iv. How much difference does price discrimination make to profit?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:2. GMG, a cinema complex, is
considering charging a different price for
the afternoon showings of its films
compared with the evening ticket price
for the same films. It has estimated its
afternoon and evening demand m
functions to be:
PA8.5 -0.25QA
PE12.5-0.4QE
Where PA and PE are ticket prices (in)
and QA and QE are number of customers
per week (in hundreds). GMG has
estimated that its fixed costs are 2,000
per week, and that its variable costs are
50 pence per customer.
REQUIRED:
Calculate the price that GMG should
charge if it does not use price
discrimination, assuming its objective is
to maximize profit.
11. Calculate the prices that GMG
should charge if it does use price
discrimination.
122. Calculate the price elasticities of
demand in the case of price
discrimination.
iv. How much difference does price
discrimination make to profit?
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