Suppose there are four buyers all considering purchasing round-trip airfare from Boston to Miami with the following price elasticities of demand for this purchase: Buyer A: 1.5, Buyer B: 0.7, Buyer C: 1.0, Buyer D: 2.3. If the airline knows of these elasticities and practices price discrimination, which buyer will pay the highest price for the airfare?
A) Buyer A
B) Buyer B
C) Buyer C
D) Buyer D

Question

Quizplus · Accepted Answer

Buyer B, with a price elasticity of demand of 0.7, is less sensitive to price changes compared to the others. This means they are more likely to accept higher prices without significantly reducing their quantity demanded, making them the target for the highest price under price discrimination.

Suppose There Are Four Buyers All Considering Purchasing Round-Trip Airfare