Suppose that a local gym can divide its customers into two groups with different price elasticities of demand.Which of the following is true?
A) If a local gym uses price discrimination, it will charge the lower price to the group with the most price elastic demand.
B) If a local gym uses price discrimination, it will charge the higher price to the group with the most price elastic demand.
C) Although the different groups have different price elasticities of demand, they have the same willingness-to-pay for gym memberships.
D) Price discrimination will not benefit a local gym.

Question

Quizplus · Accepted Answer

Price discrimination involves charging different prices to different groups based on their price elasticity of demand. A group with more elastic demand is more sensitive to price changes, so to maximize revenue, a lower price is charged to this group to encourage higher consumption.

Suppose That a Local Gym Can Divide Its Customers into Two