Distinct market segments | Accounting homework help
A private-garage owner has identified two distinct market segments: short-term parkers and all-day parkers with respective demand curves of P S = 3 – (Q S /200) and P C = 2 – (Q C /200). Here P is the average hourly rate and Q is the number of cars parked at this price. The garage owner is considering charging different prices (on a per-hour basis) for short-term parking and all-day parking. The capacity of the garage is 600 cars, and the cost associated with adding extra cars in the garage (up to this limit) is negligible.
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Given these facts, what is the owner’s appropriate objective? How can he ensure that members of each market segment effectively pay a different hourly price?
*Starred problems are more challenging.
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What price should he charge for each type of parker? How many of each type of parker will use the garage at these prices? Will the garage be full?
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Answer the questions in part (b) assuming the garage capacity is 400 cars.
