Suppose a producer is able to separate customers into two groups,one having a price inelastic demand and the other having a price elastic demand.If the producer's objective is to increase total revenue,what should she do
A)Increase the price charged to customers with the price elastic demand and decrease the price charged to customers with the price inelastic demand.
B)Decrease the price charged to customers with the price elastic demand and increase the price charged to customers with the price inelastic demand.
C)Decrease the price to both groups of customers.
D)Increase the price for both groups of customers.

Question

Quizplus · Accepted Answer

When a producer faces customers with price inelastic demand, it means that customers are willing to pay a higher price for the product. Therefore, the producer can increase the price charged to these customers without significant decreases in demand, leading to an increase in revenue. On the other hand, customers with price elastic demand are more sensitive to price changes, and a decrease in price will likely result in an increase in demand, leading to an increase in revenue. Therefore, decreasing the price charged to customers with price elastic demand and increasing the price charged to customers with price inelastic demand is the best choice to increase total revenue.

Suppose a Producer Is Able to Separate Customers into Two