Offering a student discount is a form of price discrimination that does not entirely displease students. This EconModel application demonstrates that price discrimination is also profit maximizing behavior for merchants.

**Model Link: Price Discrimination
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Printable PDF Exercises

The application begins by showing you how to graph the demand and profit curves for two groups of customers separately and in the aggregate. You then determine the profit-maximizing strategy under two scenarios:

- The Base Case -- maximizing profits for a single price
- Price Discrimination -- maximizing profits by charging different prices to different customers

The numerical results confirm the graphical presentation and allow you to calculate the profits to be gained from price discrimination.

**Classic
Economic Models**

**Microeconomics**

**Introduction**

Overview of Micro Models

**Supply and Demand**

Basic Supply and Demand

Who Pays a Sales Tax?

The Cobweb Model and

Inventory-Based Pricing

**Theory of the Firm**

Perfect Competition

Monopoly and

Monopolistic Competition

Price Discrimination

The Demand for Labor

**Theory of the Consumer**

Two Goods - Two Prices

Intertemporal Substitution

Labor Supply, Income Taxes,

and Transfer Payments

**Macroeconomics**

**Introduction**

Overview of Macro Models

**Models in Chronological Order**

The Classical Model

The Simple Keynesian Model

The Keynesian IS/LM Model

The Mundell-Fleming Model

Real Business Cycles

The IS/MP Model

The Solow Growth Model

**Financial Markets
**
Utility-Based Valuation of Risk

Mean-Variance Analysis:

Risk vs. Expected Return

Fixed Income Securities:

Mortgage/Bond Calculator

Growth Investments:

Present Value Calculator

**Resources**