Questions: Suppose that at first, Rajiv charges the same price of 8 per admission in both markets so that the total number of admissions demanded is 9 tickets. Suppose now that Rajiv decides to charge a different price in each market. To maximize revenue, Rajiv should charge 30 per admission in Market A and 12 per admission in Market B. At these prices, he will sell a total quantity of 24 admission tickets per day. Complete the following table by calculating Rajiv's total revenue from selling in both markets under the nondiscriminatory as well as the discriminatory price policy. Pricing Policy Total Revenue (Dollars) Nondiscriminatory Discriminatory

Solution Steps

Under the nondiscriminatory pricing policy, Rajiv charges $8 per admission in both markets, selling a total of 9 tickets. Total revenue is calculated as Price * Quantity. Therefore, the total revenue is $8 * 9 = $72.

Under the discriminatory pricing policy, Rajiv charges $12 per admission in Market A and $6 per admission in Market B. From the graph, we can see that at a price of $12 in Market A, the quantity demanded is 18 tickets. At a price of $6 in Market B, the quantity demanded is 6 tickets. Total revenue in Market A is $12 * 18 = $216. Total revenue in Market B is $6 * 6 = $36. Therefore, the total revenue under discriminatory pricing is $216 + $36 = $252.

\begin{tabular}{lc} Pricing Policy & \begin{tabular}{c} Total Revenue \\ (Dollars) \end{tabular} \\ \hline \begin{tabular}{lc} Nondiscriminatory & $\boxed{72}$ \\ Discriminatory & $\boxed{252}$ \end{tabular} \end{tabular}

Rajiv charges a lower price in the market with a relatively more elastic price elasticity of demand. This is because a lower price is charged in market B which has a flatter demand curve compared to market A. A flatter demand curve means the quantity demanded is more responsive to price changes, thus indicating higher price elasticity of demand.

Final Answer