A local restaurant charges its regular customers
Question # 00535564
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Updated on: 05/28/2017 01:36 AM Due on: 05/28/2017
(third-degree price discrimination—5 points) A local restaurant charges its regular customers (who are not senior citizens) $15 for a dinner entrée and $10 for a lunch entrée. The estimated price elasticity of demand for regular customers is 2 at dinnertime.
What is the price elasticity of demand for regular customers at lunchtime?
Senior citizens qualify for a 10 percent discount at the restaurant for either lunch or dinner. If the restaurant is maximizing profits, what are the price elasticities of senior citizens at lunchtime and dinnertime, respectively?
Assume that the marginal cost of providing an entrée to a customer does not depend on the time of day or the age of the customer.
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Rating:
/5
Solution: A local restaurant charges its regular customers