AP Micro Quiz 14

Perfect Price Discrimination

When a monopolist charges each consumer their willingness to pay — the maximum that the consumer is willing to pay

Single-Price Monopolist

Charges all consumers the same price

Price Discrimination

When sellers charge different prices to different consumers for one good

Sellers who price discriminate…

Try to raise prices for consumers who would be willing to pay more

Lower prices for consumers who are only able to pay less

What happens with price discrimination?

This reduces consumer surplus to zero and transform it into a producer surplus

The more different prices the monopolist can charge: the lower the lowest price, the more money extracted from consumers

Simple Price Discrimination Graph

Price Discrimination Graphs