Tutoring Service and Price Discrimination Context-Rich Problem

Michelle Kim, Glendale Community College
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This material is replicated on a number of sites as part of the SERC Pedagogic Service Project


Students are asked to apply their knowledge in price discrimination and elasticity to advise on an optimal pricing scheme for a service in a real-life scenario.

Learning Goals

Students are expected to use price discrimination and elasticity to recognize the existence of different pricing schemes for a realistic product, consider the pros and cons of each, and recommend and explain what they consider to be the best one.

Context for Use

This activity can be used in a college level Principles of Microeconomics class of any size. You can choose to have the students work in pairs for a more engaged discussion, individually as an in-class assignment or as a part of an exam, or outside of class as homework. If conducted in class, roughly 15-20 minutes will be needed.

Description and Teaching Materials

You and your friends at the College decide to set up a tutoring service of all subjects called Tutoring By The Best and you become the one in charge of economics. You are discussing the pricing plan and there seems to be a conflict between two groups of tutors: one group says that the fee should be set as high as possible so each student will generate the highest possible revenue while the other group says that the fee should be as minimal as possible in order to attract the maximum number of students interested in getting tutored. The two sides turn to you to provide a viable solution as the economist of the group. You try to recall what you learned in your economics course and vaguely remember that it is no clear-cut either-or answer to a dilemma like this. What side, if any, would you take and why? If you will not take any sides but rather offer an alternative solution, what would it be and how would you explain the suggestion to your fellow tutors? Keep in mind that most of these tutors, though very smart in their own areas of expertise, have never taken economics before and you should avoid the use of too much economic jargon or technicalities.

Please keep your response to no more than one and no less than half a page.

Price Discrimination Context-Rich Problem (Microsoft Word 2007 (.docx) 12kB Mar26 12)

Teaching Notes and Tips

  • The activity is typically given after the concept is studied in class, either at the end of a chapter or content module or at the end of the term to bring different concepts together.
  • It might be necessary to remind the students, especially if it is the first time students are exposed to this type of problem, that the audience be very clear in the answer. The response should not be written as an exam or homework essay, but as if they are actually talking to the person in the scenario.


  • The problem can check for students' ability to transfer knowledge by asking them to answer the question once without using economic jargon, and another time, with specific economic concepts and graphical illustration or calculation (provided that the numbers are given in the problem), to see that students are able to make the connection between theoretical understanding and practical application in the real world.
  • Students should be able to not only respond to the problem but defend their answer with logic and concrete economic reasoning.
  • The activity can be expanded on a deeper level by encouraging students to combine and incorporate ideas from different points of the course.

References and Resources