Problem:
Your firm has identified two distinct groups of consumers for its product - each which consist of 50% of the market. Your market research suggests that group A has a price elasticity of demand of 4. Group B has a price elasticity of demand of 2. Assume that your marginal cost of producing your product is $10.
(1) If you could identify which the group to which each consumer belong, how would you go about setting prices? Outline the price(s) that you would charge and suggest strategies that you might use to implement the price(s)?
(2) If you cannot identify which each consumer belong to, how would you go about setting prices? Outline the price(s) that you would charge and suggest strategies that you might use to implement the price(s)?