Offering a student discount is a form of price discrimination that does not entirely displease students. This EconModel application demonstrates that price discrimination is also profit maximizing behavior for merchants.
The application begins by showing you how to graph the demand and profit curves for two groups of customers separately and in the aggregate. You then determine the profit-maximizing strategy under two scenarios:
The numerical results confirm the graphical presentation and allow you to calculate the profits to be gained from price discrimination.
Classic Economic Models
Overview of Micro Models
Overview of Macro Models