U4 M63 Price Discrimination

Unit elastic happens when MR = 0

Price discrimination seeks to charge each consumer what they are willing to pay in an effort to increase profits.

• Those with inelastic demand are charged more than those with elastic demand

• Conditions required:

  • Monopoly-like power

  • able to segregate the market

When price discriminating, Marginal Revenue is equal to Demand Price

Consumer surplus disappears when Price Discrimination is used and deadweight loss disappears too

D = MR intersection with MC (socially optimal = allocatively efficient)