Two fares instead of one, $30 and $21, with a scanned resident card blocking resale: the case this MT445 Unit 7 price segmentation proposal makes. Searches like "mt 445 unit 7 assignment example", "mt445 unit 7 sample" and "mt445 unit 7 example" land here.
What a finished MT445 Unit 7 price segmentation proposal looks like
Five pages in proposal form, addressed to the owners, with a conditions checklist and two tables. The checklist tests the three conditions third-degree price discrimination needs: some control over price, customer groups whose price sensitivity differs and can be identified, and a way to stop low-fare tickets reaching high-fare riders. Table one splits the Unit 3 demand estimate into segments, visitors at 11,593 minus 165.9 times the fare and residents at 3,000 minus 80 times it. The second compares four plans for a shoulder week: $26 for everyone at $189,396 of contribution, $28 for everyone at $193,448, the unconstrained split of $36.38 and $20.20 at $209,975, and the proposed $30 and $21 at $203,164. A closing section prices leakage and the card program.
How a MT445 Unit 7 example is structured
Conditions come before fares, because a split price that fails any one of them either earns nothing or invites arbitrage. Pricing power is argued from the market: the line runs the only scheduled service to the island, although a catamaran operator is studying entry, the subject of the next unit. Different sensitivities are shown with the segment equations. Separation rests on a photo card issued against proof of island address and scanned at the gangway. The pricing rule follows, marginal revenue in each segment set equal to the $2.90 marginal cost, with the lower fare where demand is more elastic. The unconstrained visitor fare of $36.38 is shown and set aside, since it sits $10 above anything visitors have paid. One paragraph separates all of this from peak pricing, which rests on capacity cost rather than on who the rider is.
Three conditions, checked in order
Control over price, identifiable groups with different price sensitivity, and a barrier to resale are each tested against the line's own evidence before any fare is proposed.
Two demand curves from one
The Unit 3 estimate is divided into visitor and resident equations that add back to the original. At $26, visitor elasticity is about minus 0.59 and resident elasticity about minus 2.26.
Marginal revenue set to $2.90 twice
Solving each segment separately gives $36.38 for visitors and $20.20 for residents, lifting weekly contribution about $14,135 above the best single fare. Total tickets stay at 6,940, as straight-line demand predicts.
The fares actually proposed
A $30 visitor fare stays near observed prices, and a $21 resident fare draws 1,320 resident trips a week. Contribution reaches $203,164, about $9,716 above charging everyone $28.
Cards, leakage and running costs
A photo card scanned at boarding ties each resident fare to one person. If 150 visitor trips a week slip through on borrowed cards, the line forgoes about $1,350, small beside the gain.
Where marks go in MT445 Unit 7
Different prices for different groups, recommended with no test of whether resale can be stopped, is the gap graders most often find in segmentation proposals. All three conditions tend to be expected, stated accurately; a paper that calls any discount price discrimination, or confuses it with charging more for peak sailings, draws comment. Setting the higher fare in the less elastic segment, and knowing why, is the core economic test. Fares lifted straight from the formula, without asking whether they fall inside observed prices, overreach the demand estimate. Leakage and administration are frequently ignored, though a card program has running costs and some cards will be lent. Fairness deserves a sentence as well, since visitors may resent a visible two-tier fare, and a proposal naming that risk reads as considered rather than merely clever.
Get a MT445 Unit 7 example written to your instructions
Outline the firm and the customer groups your Unit 7 prompt describes, along with any demand or price data, and attach the rubric. A proposal that tests each condition, sets fares segment by segment and prices the fence stopping resale comes back in 24-48h. A first custom sample from the desk is free of charge.
MT445 Unit 7 questions, answered
What conditions does third-degree price discrimination require?
Three. The seller needs some control over price, since a firm in a perfectly competitive market cannot hold a price above its rivals'. Its customers must fall into groups with different price elasticities that the seller can identify, by age, location or membership for instance. And resale between groups must be preventable, or low-price buyers will supply the high-price group.
Is charging more at peak times the same thing?
Not exactly. Peak pricing charges more when capacity is scarce, so the higher price reflects a higher cost of serving that trip, whereas third-degree discrimination charges different groups different prices for the same service at the same cost. Your proposal can recommend both, but it should keep them apart and justify each on its own grounds.
Should the proposal discuss whether a split fare is legal?
Mention it only as far as your sources support. Price differences between customer groups are common, but rules vary by industry and place, and some transport fares are regulated. A sentence noting that the firm would confirm its position with counsel is usually enough; detailed legal analysis falls outside an economics unit and will not earn marks.