In addition to my job at Pizza Hut, I work at Madison Square Tanning. With prom season approaching, Ellen (who also works there) suggested that the company give discounts to high school students. Being economically savvy, the owners agreed that it was a good idea, and offered $5.00 coupons off any package for high school students.
This is a prime example of price discrimination. Since tanning for students is relatively elastic compared to adults (hopefully it is not an inelastic service for anybody), the company offered coupons to make it easier for the students. This is good business, too, because many of these students might not have come to our business/or continued service with us for a while because it is difficult for students to come up with $30 or more for a tanning package. We didn’t lose any money or customers, so everything from these coupons was a profit. Also, the students who are using these coupons who regularly tan there are experiencing a larger consumer surplus, because they will pay less than they were willing/had anticipated. However, this isn’t bad for the business, because the coupon is not that large, so the company is still operating with a bigger producer surplus.
Ok, so I got off topic here. Anyway, because of the elasticity of the service, there is price discrimination that works very well. It is the same as the airplane tickets. Business people travel during the week, and rarely on the weekends, so the tickets for week-only flights are more expensive because businessmen/businesswomen have a more inelastic need for the flights. In my scenario, businesspeople are to adults what family vacationers are to students. Anyway. If you are reading this and you’re by a window, and you look outside and think to yourself, “Wow it’s beautiful and warm and sunny out!” Do it. Get up and go outside and play Frisbee and have a picnic. If you’re at school, don’t even tell the teacher where you’re going. Just leave. (Just kidding, of course). And if you’re at home and you’re thinking to yourself, “Yeah right I have too much homework” take your homework outside with you….Enjoy the weather!
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4 comments:
hmm, why is it that sales make me feel like i should buy something i don't want or need just because it's cheaper? seriously, i don't tan at all (i'm sure you can tell) and the fact that they were on sale made me feel like i should. clever marketing ploy!
i am so brilliant that i came up with that! i'm not quite sure i understand why tanning is more elastic for adults than students? i don't think either REALLY need it at all. i think the most elastic tanning gets is when people are going on vacation and don't want to burn.. nobody NEEDS skin cancer ;)
nice job using the blog as a mini ad tho!! haha
i agree, this weather rocks! the coupons were a great idea. by offering the discount it would draw new customers in becuase they wouldnt have to pay full price to see what it was like, and old customers would feel better about themselves and pay less.
Elasticity can change at the time of year, too - so this time of year, prom, etc - yeah, I could buy that it's more inelastic for teens right now. :)
Not to mention that many adults just don't think of it as a way to really spend their money. If you broke down percentages, how much of your clientele is under...say...24? Just curious.
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