In Longolia,beer drinking is associated with blood types.The demand for beer of the three major blood groups is shown below:

-Refer to the above information to answer this question.If the beer producers could price discriminate on the basis of blood types,in order to maximize revenue,which of the following statements is correct?
A)The consumer group with the highest price elasticity of demand should be charged the highest price.
B)The consumer group with the highest price elasticity of demand should be charged the lowest price.
C)The consumer group with the lowest price elasticity of demand should be charged the lowest price.
D)The consumer group which should be charged the highest price depends upon which has the smallest marginal utility.

Question

In Longolia,beer drinking is associated with blood types.The demand for beer of the three major blood groups is shown below:
 
-Refer to the above information to answer this question.If the beer producers could price discriminate on the basis of blood types,in order to maximize revenue,which of the following statements is correct?
A)The consumer group with the highest price elasticity of demand should be charged the highest price. 
B)The consumer group with the highest price elasticity of demand should be charged the lowest price. 
C)The consumer group with the lowest price elasticity of demand should be charged the lowest price. 
D)The consumer group which should be charged the highest price depends upon which has the smallest marginal utility.

Quizplus · Accepted Answer

Price discrimination is the practice of charging different prices for the same product to different consumers. It can only be successful if there are identifiable groups with different price elasticities of demand. In the case of Longolia, the demand for beer is associated with blood types. Therefore, price discrimination based on blood type can be a successful strategy.

The consumer group with the highest price elasticity of demand should be charged the lowest price. This is because consumers with high price elasticities of demand are more sensitive to changes in price. If they are charged a high price, they are more likely to reduce their consumption or switch to a substitute product. On the other hand, consumers with low price elasticities of demand are less sensitive to changes in price, so they can be charged a higher price without a significant decline in demand.

Therefore, in order to maximize revenue, the beer producers should charge the lowest price to the consumer group with the highest price elasticity of demand, which in this case is blood group AB. This will result in the maximum sales and revenue from this group.

In Longolia,beer Drinking Is Associated with Blood Types