Why might senior citizens or children receive price discounts relative to the rest of the population?
Senior citizens and children receive discounts because they usually have more elastic demands than the rest of the population. If children’s demand for movies is elastic, giving them a discount lowers the price they pay and increases the theater’s total revenue. The rest of us aren’t as responsive to the price of movies, so the theater doesn’t gain by giving us a discount. Whenever different groups of customers have different price elasticities of demand, firms can increase their total revenue by using price discrimination. • What determines whether consumers alter their purchases a little or a lot in response to a price change? Three factors help determine how elastic the demand for a particular product is. First, the greater the number of close substitutes, the more elastic the demand. If the price of Kellogg’s Corn Flakes goes up, you can find lots of other things to eat. If the price of required economics textbooks goes up, you can’t just buy a cheaper anthropology text instead-not
