4. Price Discrimination Let\'s assume that you are a manager for an amusement pa

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4. Price Discrimination Let's assume that you are a manager for an amusement park. Your company has just found new evidence that your market demand can be broken into two separate groups. These two groups, students and non-students, have two different demand functions. Those inverse functions are given below Students Non-Students:1p (if you aggregated those functions, you would obtain p 13 - g if p > 8 and p-9- pS 8). You also know that the total and marginal cost functions for the resort are if MC = 2+q a) Plot the inverse demand curves for students and non-students. Include both marginal revenue curves and supply curves on the same graph. Make sure to label graphs clearly b) Assume that you can only charge one price for tickets. What is the equilibrium price, quantity and profits if you choose to act as a monopolist? c) Now, let's assume that you choose to price discriminate. What is the equilibrium price and quantity for students and non-students? What is your new total profit? Round answers to two decimal places d) Do the prices in part (c) make sense? Why would the price for one group be higher than the price for the other group? e) What kind of price discrimination is this? Is there any way you can prevent arbitrage in this case? If so, how? Why is it important to prevent arbitrage in price discrimination?

Explanation / Answer

What is an emerging market?

An emerging market economy (EME) is defined as an economy with low to middle per capita income. Such countries constitute approximately 80% of the global population, and represent about 20% of the world's economies. The term was coined in 1981 by Antoine W. Van Agtmael of the International Finance Corporation of the World Bank.

Although the term "emerging market" is loosely defined, countries that fall into this category, varying from very big to very small, are usually considered emerging because of their developments and reforms. Hence, even though China is deemed one of the world's economic powerhouses, it is lumped into the category alongside much smaller economies with a great deal less resources, like Tunisia. Both China and Tunisia belong to this category because both have embarked on economic development and reform programs, and have begun to open up their markets and "emerge" onto the global scene. EMEs are considered to be fast-growing economies.

What are the characteristics of an emerging market?

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