ECON 201 Lecture Notes - Lecture 19: Economic Surplus, Price Discrimination, Aspirin
ECON 201 – Lecture 19 – Chapter 15
*All charts and graphs based off or replicated by Joel Han in class unless stated otherwise
Practice
oProduction of aspirin is carried out at a constant Marginal Cost
Show market equilibrium for competitive firm and monopoly
oIn Competitive Market, Constant MC, like above, = inelastic supply
Perfect Price Discrimination
oMonopolist doesn’t have to charge same price for all consumers
oIf monopolist saw everybody’s Willingness to Pay, could make that the price for
each consumer
oAnything lower than MC, wont sell
Won’t sell to X, below MC
oNo Consumer Surplus, CS=0
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Document Summary
Econ 201 lecture 19 chapter 15. *all charts and graphs based off or replicated by joel han in class unless stated otherwise. Practice: production of aspirin is carried out at a constant marginal cost. Show market equilibrium for competitive firm and monopoly: in competitive market, constant mc, like above, = inelastic supply. Perfect price discrimination: monopolist doesn"t have to charge same price for all consumers, if monopolist saw everybody"s willingness to pay, could make that the price for each consumer, anything lower than mc, wont sell. Won"t sell to x, below mc: no consumer surplus, cs=0, but, no dwl. Definition of price discrimination: charging different consumers different prices, when production costs of the good are the same, perfect price discrimination is seldom possible. Consumer won"t share their wtp with the producers: in practice, firms try to set different prices for different groups of consumers. Movie tickets: business travelers have higher wtp. Discount coupons: people with coupons have a lower wtp.
