Final answer:
First degree price discrimination involves charging each customer their maximum willingness to pay, second degree involves different prices based on quantity purchased, and third degree involves different prices for different customer segments based on price elasticity of demand.
Step-by-step explanation:
First degree price discrimination occurs when a seller charges each customer their maximum willingness to pay. The seller collects all consumer surplus and there is no deadweight loss. An example of first degree price discrimination is when a diamond seller negotiates a price individually with each customer based on their preferences and ability to pay.
Second degree price discrimination involves offering different prices based on the quantity purchased. An example is when a movie theater charges less per ticket for a group of friends buying multiple tickets compared to individuals buying single tickets.
Third degree price discrimination occurs when a seller charges different prices to different customer segments based on their price elasticity of demand. An example is when an airline offers discounted fares to senior citizens on certain flights.