Price Discrimination Diagram. With price discrimination the firm can charge two different prices. Third degree price discrimination is the most common type of price discrimination because classifying customers into a few groups is easier for a firm than knowing the.
If we assume marginal cost mc is constant across all markets whether or not the market is divided it will equal average total cost atc. 4 120 480. Price discrimination in increasing a firm s profitability.
The total revenue from the first segment is equal to the area p1 b q1 o.
Third degree price discrimination also called group price discrimination occurs when a firm divides its customers into two or more groups based on their price elasticity of demand and charges them different prices. The total revenue from the first segment is equal to the area p1 b q1 o. Third degree price discrimination refers to the fact that the monopolist divides his customers into two or more classes or groups charging a different price from each class of customers. Profit maximisation will occur at the price and output where mc mr.
