This note describes the more common methods of calculating Price Premiums (also known as Relative Prices). Students will explore Reservations Prices and % Good Value, the concepts that form the foundation of price-quantity schedules, as well as Price Elasticity, a frequently used index of how responsive the market is to changes in price. The note stresses that understanding demand functions and Price Elasticity is key to the calculation of optimal prices and uses the familiar concept of Prisoner's Dilemma and addresses price tailoring.
