3rd Degree price discrimination. Sal's satellite company broadcasts TV to subscribers in Los Angeles and New York. The demand functions for each of these two groups are: PNY 150 3 * QNY or QNY = 50 - 1/3 * PNY 3/2 * QLA or QLA PLA 120 80- 2/3 PLA where Q is in thousands of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given by C 100030 * Q and MC 30 where Q QNY QLA What are the profit maximizing prices and quantities for New York and Los Angeles markets? a) Draw the graphs of both the NY and LA markets and determine the optimum prices and quantities. Note that MRNY 150 6 QNY and MRLA = 120 - 3 * QLA b) What are the elasticities of demand for the NY and LA markets? c) For third degree price discrimination, what is the relationship between pricing and elasticity of demand in the two markets? d) Under what conditions can a firm do third degree price discrimination?
3rd Degree price discrimination. Sal's satellite company broadcasts TV to subscribers in Los Angeles and New York. The demand functions for each of these two groups are: PNY 150 3 * QNY or QNY = 50 - 1/3 * PNY 3/2 * QLA or QLA PLA 120 80- 2/3 PLA where Q is in thousands of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given by C 100030 * Q and MC 30 where Q QNY QLA What are the profit maximizing prices and quantities for New York and Los Angeles markets? a) Draw the graphs of both the NY and LA markets and determine the optimum prices and quantities. Note that MRNY 150 6 QNY and MRLA = 120 - 3 * QLA b) What are the elasticities of demand for the NY and LA markets? c) For third degree price discrimination, what is the relationship between pricing and elasticity of demand in the two markets? d) Under what conditions can a firm do third degree price discrimination?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3rd Degree price discrimination. Sal's satellite company broadcasts TV to subscribers in Los Angeles and New York. The demand functions for each of these two groups are:
PNY 150 3 * QNY or QNY = 50 - 1/3 * PNY
3/2 * QLA or QLA
PLA 120
80- 2/3 PLA
where Q is in thousands of subscriptions per year and P is the subscription price per year. The cost of providing Q units of service is given by
C 100030 * Q and MC 30
where Q QNY QLA
What are the profit maximizing prices and quantities for New York and Los Angeles markets?
a) Draw the graphs of both the NY and LA markets and determine the optimum prices and quantities. Note that
MRNY
150 6 QNY and MRLA = 120 - 3 * QLA
b) What are the elasticities of demand for the NY and LA markets?
c) For third degree price discrimination, what is the relationship between pricing and elasticity of demand in the two markets?
d) Under what conditions can a firm do third degree price discrimination?
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