Assume that the buyers of good Z fall into two groups: buyers that have elastic demand and buyers that have inelastic demand. If the firm selling good Z can charge different prices to different groups of people, the firm would prefer to ______________ the price charged to the elastic group and _______________ the price charged to the inelastic group.
A)raise; lower
B)lower; lower
C)lower; raise
D)raise; raise

Question

Quizplus · Accepted Answer

The firm would prefer to lower the price charged to the elastic group to increase quantity sold without losing much revenue per unit, and raise the price charged to the inelastic group because their quantity demanded is less sensitive to price changes, allowing the firm to increase revenue.

Assume That the Buyers of Good Z Fall into Two