c) Third degree price discrimination

d) third degree price discrimination: necessary conditions, diagrammatic analysis, costs and benefits to consumers and producers

third degree price discrimination = when a firm charges a different price to different consumers for the same good/service

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

affects on consumers

• low consumer surplus for low PED consumers

• high consumer surplus for high PED consumers

affects on firms

• revenue increase

• administrative costs