Prices are based upon the price elasticity of demand in each given In other terms, this means that during ladies night at the localbar, it costs more for men to have a beer than women simply becausethese bars find it o.k. to charge females less, as a way to draw morefemales to the business on a specific night. Price discrimination is partof the commercial and business world. Movie theaters, magazines,computer software companies, and thousands of other businesses havediscounted prices for students, children, or the elderly. One importantnote though, is that price discrimination is only present when the exactsame product is sold to different people for different prices. First classvs. coach in an airline (though sometimes just differing in how manyfree drinks you can get) is not an example of price discriminationbecause the two tickets, though comparable, are not identical. Pricediscrimination is based upon the economic idea of marginal analysis.This process deals specifically with the differences in revenue and costsas choices and decisions are made. Profit maximization is achieved notwhen the number of products sold is the highest, or when the price isthe highest. . Groups that are more sensitive to prices, (students andsenior citizens for example), have a lower price elasticity of demand andare the ones that are often charged the lower prices for the identicalgoods or services. The key to price discrimination and using it to fullycompliment other economic practices, ultimately achieving the totalprofit maximization, is the ability to effectively and efficiently collect,analyze, and act upon data gathered about the different groups. Firstof all, the groups must be accurately identified and the differencesbetween groups must be thought of ahead of time. Children, genders,and senior citizens are easily singled-out by appearance, while militarypersonnel, college students, and other groups must carry some sort ofidentification. Firms typi...
