4. Define first degree price discrimination, second degree price discrimination, and third degree price discrimination. Provide...

4. Define first degree price discrimination, second degree price discrimination, and third degree price discrimination. Provide an example of each.

Expert Solution

Answer :

First degree price discrimination :

when the seller is able to sell each separate unit of the output at different prices to different consumers is called first degree price discrimination.It is also called perfect price discrimination beacuse there is no consumer surplus left at that price level. Under first degree price discrimination, the seller will charge the price which is equal to the maximum price that the consumer is willing to pay.

Example - Lawyer and law professionals

Second degree price discrimination:

When the firms or sellers charge separate prices for different quantities of a commodity from buyers is called second degree price discrimination.

Example - Tours & Travels company

Third degree price discrimination:

When the seller divides his buyers into two or more than two sub-markets and charges a different price in each sub-market is called third degree price discrimination. It depends upon the demand conditions of sub-markets.

Example - Dumping , electricity company

Rahul Sunny answered 2 years ago

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