In third-degree price discrimination, consumers with which type of demand pay a higher price?

In third-degree price discrimination, sellers charge different prices to different groups of consumers based on their willingness to pay, which is closely related to the elasticity of demand. Consumers with inelastic demand are generally less sensitive to changes in price; this means that even if prices increase, the quantity demanded does not decrease significantly. As a result, firms can charge these consumers a higher price because they are more willing to pay despite the cost increase.

In contrast, consumers with elastic demand are more sensitive to price changes. When prices rise, the quantity they demand tends to fall significantly, leading sellers to price their goods lower for these consumers to maximize sales. Similarly, perfectly inelastic demand would imply that consumers will buy a fixed quantity regardless of price changes, but typically, firms do not charge significantly higher prices to this group; they could charge them based on other considerations. Unitary elastic demand means consumers will adjust their quantity demanded proportionately with price changes, which does not favor charging higher prices.

Therefore, it is the consumers with inelastic demand who are typically charged a higher price in third-degree price discrimination scenarios.