Week 10 - Hand-in Question

1. Why does the club find it profitable to use this pricing policy?
The pricing policy was utilized because the gold club found it profitable. Price discrimination is the name of this policy. Putting it simply, it is a method of selling goods or services to different customers using different prices. The common users of this particular method are the monopolies, however they are not the only one using this as can be seen in this question. The price discrimination used in this sample is based on different customer age groups. It can be seen that older groups of customers get charged a higher price. The club found profitable because a substantial amount of their customers are in the 40 and above age group.

2. What aspects of demand for membership for the different groups is the golf club exploiting?
Aspects of demand for membership that are being exploited by the golf club are the demand elasticity and reservation price. As was discussed in the first question, each of the age group has different demands for the golf course memberships, individuals aged 40 years and above have greater demand for the membership in comparison to the 10 to 17 years old group of individuals, this is how the golf club is exploiting demand elasticity. Furthermore, reservation price is also being exploited. Reservation price is the price which customers are willing to pay for the membership. With the price discrimination, the higher the age group, the higher the price, the club knows that higher age groups have higher reservation prices when it comes to golf, that is why the price is set up the way it is.

3. What determines the elasticity of demand for membership by the different groups?
Different income levels determine the elasticity of demand for membership by different groups. It can be seen that different age groups attain different income levels.