Economics Price Discrimination Questions
Price discrimination typically reduces consumer surplus. This is because price discrimination involves charging different prices to different groups of consumers based on their willingness to pay. By charging higher prices to consumers with a higher willingness to pay and lower prices to consumers with a lower willingness to pay, the seller is able to extract more consumer surplus for themselves. However, this also means that some consumers who would have been willing to pay a lower price are excluded from the market, resulting in a reduction in overall consumer surplus.