Question

At the movies, adults pay a higher ticket price than children, and each group gets a different-coloured ticket. However, when adults and children go to the snack bar, both groups pay the same amount for popcorn and other snacks.

(a) Why does price discrimination stop at the ticket window, and not practised in the case of popcorn?

(b) What are the three main requirements for successful price discrimination?

(c) If the elasticity of demand for popcorn is very high, can the theatre charge higher mark-up? Explain your answer with an appropriate diagram.

(d) Explain the difference between first-degree price discrimination and second-degree price discrimination, giving suitable examples.