Economics Price Discrimination Questions Medium
Perfect price discrimination eliminates consumer surplus entirely.
Consumer surplus refers to the difference between the maximum price a consumer is willing to pay for a good or service and the actual price they pay. In a perfectly competitive market, consumer surplus exists as consumers are able to purchase goods or services at a price lower than their maximum willingness to pay.
However, in the case of perfect price discrimination, the seller is able to charge each consumer the maximum price they are willing to pay. This means that the price charged to each consumer is equal to their individual willingness to pay, resulting in no consumer surplus.
By charging each consumer their maximum willingness to pay, the seller captures the entire consumer surplus for themselves. This maximizes the seller's profits but leaves consumers with no surplus. As a result, perfect price discrimination can be seen as disadvantageous for consumers as they have to pay the highest possible price for the goods or services they desire.