You are the only veterinarian in a small town; the next closest vet is 50 miles

Question

You are the only veterinarian in a small town; the next closest vet is 50 miles away. The population in your town consists of families with household pets and farmers with livestock. You have noticed that the farmers are less sensitive to price changes for vet services (diagnostic services) than the families with small pets. Specifically, you have found that the farmers have an own price elasticity of demand of -1.5 for diagnostic services and the families with small pets have an own price elasticity of -2.5. How can you use this information to your advantage? (The more specific your answer the more points you get.)

Explanation / Answer

This information can be used to my advantage as on the basis of price elasticity of demand of each group, i can charge different prices from each goup. since the price elasticity of demand of farmers is less elastic than families with small pet, So i can charge the higher price from the farmers because the decrease in quantity will be less than the increase in price , so revenue will increase more as compared to families with pets as there demand is more elastic than farmers.

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