Overview
First degree price discrimination is a pricing strategy that allows sellers to charge each consumer the maximum price they are willing to pay. This method captures all consumer surplus, maximizing profits for the seller while potentially leaving consumers with no extra benefit. It is commonly seen i...
Key Terms
Example: If a consumer is willing to pay $100 for a product but buys it for $80, their consumer surplus is $20.
Example: If a 10% increase in price leads to a 20% decrease in quantity demanded, the price elasticity is -2.
Example: Luxury brands often target high-income consumers as a specific market segment.
Example: A company may adjust its prices based on consumer demand to maximize profits.
Example: A collector may be willing to pay $500 for a rare coin.
Example: Airlines often use dynamic pricing to adjust ticket prices based on demand.