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A Company, Celebs are Us, is the only firm to offer individuals an evening with selected celebrities to discuss the Meaning of Life: From Plato to Beckham. It faces two types of demand. The first group of consumers are the old aristocracy who can afford to pay a lot so that they can rub shoulders with the new-money. The second group consists of all the hopefuls who would like to become celebrities but cannot yet fully afford it. The price elasticity of the demand for such evenings by the old aristocracy is less than unity while that of the ‘wannabes' is greater than unity. Assuming that the company cannot discriminate in pricing the evenings:
(a) Under which circumstances will the evenings be offered to both groups of consumers?
(b) Under which circumstances will the evenings be offered only to one group of consumers?
(c) How would your answers to (a) and (b) change if the price elasticity of the old-aristocracy was greater than that of the ‘wannabe'?
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