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first degree price discrimination

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Two consumers, Consumer 1 and Consumer 2, purchase the same product.
They have the following demand curves:

Q1 = 500 - 10 P and
Q2 = 500 - 20 P.

MC for the firm is $10.

(a) Calculate the prices that should be charged to each
customer if the seller is able to use first degree price discrimination.
(b) Is this a good strategy, or should the firm charge the same price to both customers?

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Solution Preview

Two consumers, Consumer 1 and Consumer 2, purchase the same product.
They have the following demand curves:

Q1 = 500 - 10 P and
Q2 = 500 - 20 P.

MC for the firm is $10.

(a) Calculate the prices ...

Solution Summary

This post examines first degree price discrimination.

$2.19
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