COMMENTARY COVERSHEET Economics commentary number: 2 Title of extract: Ripped off at the bowser Source of extract: ABC Australia Date of extract: 29/09/2011 Word count: 749 words Date the commentary was written: 8/11/2011 Sections of the syllabus to which the commentary relates: Theory of the Firm Candidate name: Francisco Muchinik Candidate number:
29 September, 2011 11:19AM AEST
Ripped off at the bowser
By Bruce MacKenzie and Helen Merkell
Expert says petrol is too expensive on the NSW north coast
An expert in business law says north coast motorists are paying too much for petrol.
Associate Professor Frank Zumbo, from the University of New South Wales, says the average …ver más…

This means that profits are increased to A+B. While producers benefit from this as profit increase, consumers are affected negatively. Those who were identified as willing and able to pay a higher price will effectively, pay a higher price. In the case of the article, motorists living in the town of Lismore are identified as the market segment with the most inelastic demand curve, and are charged a higher average price, while consumers in Albury with, for unspecified reasons, a less inelastic demand. Consumers in Lisbon lose the advantage or benefit they had when paying P1, a price much lower than the one they are willing to pay. This means that their consumer surplus is decreased as a result of the producer surplus increasing. This can be seen in Fig. 2, below:

In green, the consumer surplus is highlighted. Without price discrimination, all consumers from 0 to Q1 would enjoy a surplus from the Equilibrium point E.p. to P1 and up to de demand curve. However, with price discrimination, the consumer surplus is lost to producers, who increased their surplus from the MC curve up to P1-Ep to that same area with P1-P2 up o Q2. Price discrimination, in this case, geographic in degree three can be used by firms to increase the abnormal profits. This is the sole and final objective of the strategy. If the segments are clearly identified and divided, producers can increase the surplus and profit without having to increase