Draw the demand and supply for experiment 7.2. A rule of thumb is that sellers should charge lower prices to consumers with more elastic demand. U.S. pharmaceutical companies charge much less in Mexico than in the U.S. for the same drug. In some groups, students in experiment 7.4 could buy at the lower price and sell to others. Buying at the low price and reselling at a higher price is called arbitrage.
Airlines attempt to charge higher prices to business travellers and lower prices to tourists.
Check on your understanding of externalities. You should be able to answer the following question. Draw the private marginal cost, private marginal value, and social marginal value for a good with a positive externality. Use smooth curves. Identify demand and supply, and the quantity that arises with no intervention, and the socially optimal quantity.