Chapter 6, Problem 17P

To determine

1. The price elasticities of demand for group A and group B using mid-point method.
2. The effect of the discount on total revenue from each group.
3. If the company knows to which group a customer belongs when he or she logs on and it can decide whether to offer the 10% discount to raise its total revenue, should it offer a discount only to group A, only to group B, neither group or both the groups

Concept Introduction:

Price Elasticity of Demand:

Percentage change in the quantity demanded in response to the percentage change in the price of a good.

Mid-point Method:

If X is a variable, then percentage change of X using mid-point method is (New value of X − Old Value of X)/ Average value of X.