Question

Ricky and Anita are 10 year-olds who have a lemonade stand on a busy beach and would like to practice price discrimination. They know that they are the only sellers of lemonade on the beach and that adults have a less elastic demand for lemonade than kids so they decide to sell their lemonade for $0.25 to kids and $0.50 to adults. Will their price discrimination be successful? Why or why not?

Answer 1

Answer:

Yes, the price discrimination will be successful.

Explanation:

According to the definition of elasticity of demand we can conclude that adults value more the consumption of lemonade, for that reason are willing to pay a higher price than kids, which has a larger portfolio of beverage to choose.