AP Microeconomics / Unit 4: Imperfect Competition
4.3 Price Discrimination
Notes
Charging different prices to different buyers for the same good (movie student discounts, airline fares).
- Requires market power, the ability to separate buyers, and no resale.
- Perfect price discrimination: each buyer pays their maximum; consumer surplus becomes producer surplus; output is efficient.
Practice
Price discrimination requires:
Otherwise arbitrage.
Under perfect price discrimination, consumer surplus:
Firm captures it all.
Student discounts at movie theaters are an example of:
Different prices by group.
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