If the price elasticity of demand for airline tickets is 3.0 for a vacation traveler and 0.4 for a business traveler, then a monopolist interested in price discrimination would charge
A) a higher price for the business traveler and a lower price for the vacation traveler.
B) a lower price for the business traveler and a higher price for the vacation traveler.
C) the same price for the vacation traveler and the business traveler.
D) a less profitable price for the business traveler than for the vacation traveler.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups based on their price elasticity of demand. A higher price is charged to those with a lower elasticity (business travelers, 0.4) because they are less sensitive to price changes, and a lower price is charged to those with a higher elasticity (vacation travelers, 3.0) because they are more sensitive to price changes.

If the Price Elasticity of Demand for Airline Tickets Is