This unit considers the application of calculus in determining price discrimination and consumer surplus in a competitive market. Producer surplus and two-tier price discrimination are also developed in problems. It is noted that calculus cannot usually provide numerical answers for practical economic problems. The importance of calculus applications is seen to be in the contributions made to the development of economic theory. It is felt that the examples developed can provide insight into the theoretical relationships in economics and how calculus is used in their development. Exercises and a model exam are included, with answers provided to both at the end of the material. (MP)