Price discrimination
Definition. Price discrimination is the practice of charging different prices to different consumers for the same good or service, where the price differences do not reflect differences in cost. It requires the firm to have market power, the ability to separate consumers into groups with different price elasticities, and to prevent resale between them.
By charging higher prices to consumers with less elastic demand, a firm can convert consumer surplus into producer surplus and raise total profit above that from a single uniform price.
This term belongs to Price Discrimination in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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