To what extent is (third degree) price discrimination beneficial to consumers and producers?
Third degree price discrimination refers to when a profit-maximising firm has two different prices for different demand groups, for example, a cinema would charge the student group less than what they charge the adult group. Firms can do this because different groups have various price elasticity (the more elastic a group is, the more profit the firm would make by lowering prices).
This would mean that consumers will lose out on consumer surplus because some of their surplus has been transferred to the producer due to the varying prices. Meanwhile, the area of producer surplus would have increased. This is better shown on a demand and supply curve.
AT
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