You run a chain of movie theaters, so you commission a marketing study that cate

Question

You run a chain of movie theaters, so you commission a marketing study that categorizes your potential customers into 10 equal-sized groups according to what they’re willing to pay for a movie ($10, $9, $8, $7, $6, $5, $4, $3, $2, $1). It turns out that the low-value customer groups, those with values ($5, $4, $3, $2, $1), are all over 65 years old. All the costs of exhibiting movies are fixed except for the $3.50 royalty payment you must make to the film distributor for each ticket sold. What price should you charge for movie tickets? Should you offer senior citizen discounts? If so, how much?

Explanation / Answer

The shut-down point is $3.50,so the price could not be lower than that point.To know if the price discrimination will make more revenue,you should know a bout elasticity of the two markets, senior and non senior.

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