1. Presume a firm sells to senior citizens and others at a single price of $10. At this price it sells 10,000 units total (2,000 to seniors; 8,000 to others). It estimates that at the $10 price, seniors have an elasticity of -3 while others have an elasticity of -1.5. a) How could this firm change its pricing strategy to increase profits while holding its overall level of production constant and continuing to use only linear (per unit) prices? Be specific, and show that your suggestion works by calculating the change in profits from your suggestion.
2. Presume that Clarkson charges a single, per ticket, price to all hockey games. Describe how Clarkson could increase attendance and profitability using the following strategies. Be careful to note how it would and could enforce your proposals:
a. Charging a different price to students vs. others
b. Charging a different price for some games vs. others