Question

If the price elasticity of demand was -2.1 for commercial farmers and -2.4 for local farmers does a firm need to price discriminate between these groups? Which farmer should be charged a higher price and why?

Answer 1

The commercial farmer charged the higher price because the farmers have higher elasticity than the lower elastic demand than the local farmer's which means the demand will not decrease much if the price is higher for commercial farmers

and the price is found by the following formulas, as the production is done at a place so the marginal cost is same as selling for both then the lower e increases the price and vice versa.

P=MC/(1+(1/e) ....... where e is in a actual value (means negative if the value is negative)