Price discrimination

The final topic of the HL Theory of the Firm section is Price discrimination.  This is where the producer charges different consumers (or different groups of consumers) different prices for the same product (but not for reasons of cost differences).  There are 3 types (or degrees) of price discrimination, the imaginatively titled 1st, 2nd and 3rd degree price discrimination.  In the syllabus the emphasis is upon 3rd degree price discrimination, but knowing about the other 2 is useful to help develop your overall understanding of the concept.  It is also important to remember that although the diagram may loo quite daunting to draw at the start, if you stick with the method we looked at in lesson it should work first time every time.

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