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As you know we are the only Bubble Tea vendor on the IU Bloomington campus. Right now we are charging a price of $4 per bubble tea to all our customers. However, we have noticed that student demand (Q1) differs from faculty/staff demand (Q2), as seen by the given weekly demand curves:
Students: Q1 = 1,000 - 100P1
Faculty/Staff: Q2 = 500 - 100P2
In an effort to increase our profits we are thinking about lowering prices by 25% to customers that have student ID cards to encourage more sales to students. So I would like you to review our current pricing strategy and let me know if a 25% discount to our students would be profit enhancing. While you are reviewing our pricing strategy, let me now if we can improve our profits from our faculty/staff customers by increasing their price.
In your review, keep in mind that our marginal costs per bubble tea served are $1.
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