c) Third degree price discrimination

• define third degree price discrimination

• when a firm charges a different price to different consumers for the same good/service

• state the conditions for third degree price discrimination

• price maker firm

• no/few substitutes

• different PEDs between different consumers

• ability to separate consumers by PED

• ability to prevent resale of elastically priced goods in the inelastic market

• state the effect of third degree price discrimination on consumers

• low consumer surplus for inelastic PED consumers

• high consumer surplus for elastic PED consumers

• state the affect of third degree price discrimination on firms

• revenue increase

• administrative costs