siva_muttavarapu_assignment1

siva_muttavarapu_assignment1 - PRINCIPLES OF ECONOMICS 1...

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PRINCIPLES OF ECONOMICS 1
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You own a local sub shop in a college town. You primarily serve two groups of people: local residents (both students and other local residents) and visitors to your town. Devise a price discrimination strategy that will increase your revenues compared to a single-pricing strategy. There are two groups of people coming to the local sub shop in this college town. The resident are return customers while the visitors may not come to the city again and even if they do, they may not visit the area where shop is located. In such case, shop should implement price discrimination strategy. Charging high price to the visitors and low price to residents will increase the revenue of the shop and also, make the residents visit the store again. One way of implementing price discrimination strategy is using Two Part Pricing system. In this strategy, shop can add a one time fee (say access fee) to the visitor and additional price for each unit of product. (White, 2008) Visitors are considered as first time customer and he will be paying high price for the product as that price will include access fee in addition to the price of the product. Residents can be considered as members/returning customers and they will not pay access fee. All residents will pay is the price of the product they purchase. The access fee charged to the visitors will be included in the price of the product only. Implementation of this strategy will increase revenue from visitors and so total revenue of the shop will go up. References White (2008), “Two-part Pricing”, Retrieved on January 28, 2011, from: http://bpp.wharton.upenn.edu/mawhite/MGEC621/Session%20Note%2001%20-%20Two %20Part%20Pricing.pdf
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Suppose the cable TV industry is currently unregulated. However, due to complaints from consumers that the price of cable TV is too high, the legislature is considering placing a price ceiling on cable TV below the current equilibrium price. If the government does make this price ceiling law, diagram and explain the effects with supply and demand analysis. If the cable TV company is worried about disgruntling customers, suppose that the company may introduce a different type of programming that is cheaper for the company to provide yet is equally appealing to customers. Explain what would be the effects of this action. When government puts price ceiling on the price of cable TV below the equilibrium price, it will
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This note was uploaded on 09/11/2011 for the course ECONOMICS ECO 100 taught by Professor Ahmad during the Spring '11 term at Strayer.

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siva_muttavarapu_assignment1 - PRINCIPLES OF ECONOMICS 1...

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