It is now a noticeable thing that cinema charges vary from one age group to another. Cinemas have different charges for students, adults and the elderly. This is so because, it enables service providers to charge the maximum price that a particular group can afford to pay within a particular. It also enables them to be in a capacity to extract the consumer surplus. Surplus arises when consumers can pay more than the prevailing single market price. In such a scenario, one customer may pay half the market price while the other will compensate this by paying double the market value (King, 1999, p.5). The economic principle behind this is called price discrimination which involves the sale of identical goods at different prices but from the same provider.
Price discrimination is normally separated in degrees which mainly depend on the understanding of market segmentation and the ability of consumers to…
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