As you know we are the only Bubble Tea vendor in West Virginia's coast. Right now we are charging a price of $4 per bubble tea to all our customers. However, we have noticed that local demand (Q1) differs from visitor demand (Q2), as seen by the given weekly demand curves:
Local: Q1 = 1,000 - 100P1
Visitor: Q2 = 500 - 100P2
In an effort to increase our profits we are thinking about lowering prices by 25% to customers that have local licence to encourage more sales to locals. So I would like you to review our current pricing strategy and let me know if a 25% discount to our locals would be profit enhancing. While you are reviewing our pricing strategy, let me now if we can improve our profits from our visitor customers by increasing their price.
In your review, keep in mind that our marginal costs per bubble tea served are $1.