Currently, perfect price discriminationin which each person is charged a price at (or a smidge below) their reservation price, which is also their marginal benefitis mostly a hypothetical scenario. However, as data mining becomes more ubiquitous, we may see markets that more closely resemble perfect price discrimination through individual pricing.

1. Use a graph to illustrate perfect price discrimination.

Perfect price discrimination is where you charge each customer at their reservation price which is the maximum amount they would pay.

1. Explain how perfect price discrimination benefits the seller and depict the new producer surplus on the graph.
2. Explain how perfect price discrimination benefits the buyer and depict the new consumer surplus on the graph.
3. Explain how perfect price discrimination impacts the total market quantity.
4. Discuss whether the new equilibrium quantity is a socially optimum level.