A Recent Study Has Concluded That Working Adults Have a Price

question 87

Multiple Choice

A recent study has concluded that working adults have a price elasticity of demand of 1.72 for train services, while pensioners have a price elasticity of demand of 3.74. If price discrimination is possible, then the company providing the train service will:

• A) charge a lower price to working adults than to pensioners.
• B) charge a lower price to pensioners than to working adults.
• C) earn higher profits by charging everyone the same price.
• D) lower prices for all customers because demand is elastic for both groups.

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Definitions:

Inflation

A sustained increase in the general price level of goods and services in an economy over time, leading to a decrease in the currency's purchasing power.

Nominal Interest Rate

The stated interest rate without adjustment for inflation, representing the actual percentage paid or earned.

Open Market Sales

Operations by a central bank to sell securities in the open market to decrease the money supply in the economy.

Equilibrium Value

A state in which market supply and demand balance each other, and, as a result, prices become stable.