Children's price elasticity of demand for hot chocolate is 0.5.Adults' price elasticity of demand for hot chocolate is 1.5.If the concession stand selling the hot chocolate wants to practice price discrimination,it should charge higher prices to adults.

Question

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Price elasticity of demand measures how sensitive the quantity demanded of a good is to its price change. A lower elasticity (0.5 for children) means demand is less sensitive to price changes, so higher prices can be charged without significantly reducing quantity demanded. Conversely, a higher elasticity (1.5 for adults) indicates demand is more sensitive to price changes, suggesting lower prices might be necessary to maintain demand. Therefore, to maximize revenue through price discrimination, the concession stand should charge higher prices to children, not adults.

Children's Price Elasticity of Demand for Hot Chocolate Is 0