Consider a monopolist local movie theater which has two distinct client groups, adults and seniors. The inverse demands for the two group are given by: p(qA) = a − b · qA p(qB) = a/3-b/3.qB (a) Describe the demand function in the two markets graphically and then compute the demand elasticity in each market. (b) Compute the demand function qP under the assumption that the movie theather can only offer a single price to both segments of the market. (Hint: at a given price add the demand of the adults and senior market. You need to go from the inverse demand function to the demand function.) Illustrate the aggregate demand function in contrast to the demand functions in each segment. Now compute the optimal price of the movie theater when it can only offer a single and common price to the market segments. Who goes to the movies and who does not? (c) Next allow the movie theater to offer different prices in each segment and customers cannot mispresent their identity. What is the optimal price in each one of the markets
Consider a monopolist local movie theater which has two distinct client groups, adults and seniors. The inverse demands for the two group are given by:
p(qA) = a − b · qA
p(qB) = a/3-b/3.qB
(a) Describe the demand function in the two markets graphically and then compute the demand elasticity in each market.
(b) Compute the demand function qP under the assumption that the movie theather can
only offer a single price to both segments of the market. (Hint: at a given price add
the demand of the adults and senior market. You need to go from the inverse demand function to the demand function.) Illustrate the aggregate demand function in contrast to the demand functions in each segment. Now compute the optimal price of the movie theater when it can only offer a single and common price to the market segments. Who goes to the movies and who does not?
(c) Next allow the movie theater to offer different prices in each segment and customers
cannot mispresent their identity. What is the optimal price in each one of the markets?
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