Question

Please provide 2-3 sentences of explanation answering this question.

What is the equilibrium price under perfect price discrimination?

Answer 1

Perfect price discrimination occurs when there is different price for the different unit consumed so that all the consumer surplus can be captured on the whole. in this regard the equilibrium price of a perfect price discrimination will change from unit to unit where the willingness to pay of the consumer is the basis for the price and for instance there are two units of a good consider then the first customer will be sold for $2 and then there will be only one good remaining and the price would be 3 dollars and if the equilibrium price is considered $2 earlier without price discrimination now there is an decrease of surplus of $1 because it is discriminated in such a way that the last unit is charged based on the price when there is a quantity demanded of one unit and this captures all the consumer surplus. That is why the equilibrium price is different for different units