ECON 101 Lecture Notes - Lecture 8: Economic Surplus, Market Power, Ultrabook
Document Summary
Problem set 8. 1 on price discrimination: for a monopolist, a non-linear pricing strategy is referred to as a perfectly discriminating strategy if the pricing structure manages to extract the entire consumer surplus in the market. Let us understand such perfectly-discriminating pricing by returning to our helicopter monopolist . She faces 100 consumers, each with utility function u(x, y) = [1000 x + y] and income = rs. 10000, where x is the number of hours of helicopter travel and y is the number of cups of tea drunk. Suppose that the price of tea is 1 rupee per cup, and the helicopter monopolist has the cost structure: unit cost = rs. There are 30,000 households in country b, and of these (30000 20pb) households will buy an ultrabook when its price is pb i. e. , the demand for ultrabooks in country b is: qd (b) = 30000 20pb.
