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Price elasticity of demand and giving discounts (or not)

Ben Cahill

14th December 2010

If a business can identify a particular group that has more elastic demand, it may choose to use price discrimination and give that group a discount, in the hope of increasing total revenue. Discounts are often given to students and pensioners, as they tend to have lower incomes. But not everyone agrees…

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I’m not sure what product is involved but it goes to show that when discussing the determinants of elasticity that “depends on” should be used - senior citizens may have relatively elastic demand for going to the movies but a business is unlikely to offer discounts where their demand is similar to the general demand or in some cases more inelastic - my grandmother is pretty keen on Susan Boyle!

Ben Cahill

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