Introduction In an effort to attain their profit maximization objective, firms in different economic sectors charge different price to different customers for the same product or service. This concept is referred to as price discrimination (Fisher, Waschik & Prentice, 2010, p.44). According to Fisher, Waschik and Prentice (2010, p.45), price discrimination is practiced by all firms be it monopolies or otherwise in their pricing strategies. Examples of firms which mostly practice price discrimination include airlines, car rentals, hotel rooms and internet providing companies. There are different forms of price discrimination that a firm can incorporate. One of the forms of price discrimination is the referred to as the two-part tariff ( Kolay & Shaffer, 2003, p. 383). Fisher, Waschik and Prentice (2010,p.44) assert that two price tariff occurs when a firm charges an initial price (a lump-sum amount) for a particular good or service irrespective of the quantity purchased and an additional price for every unit purchased. In a market characterized by homogeneous demand, it is possible for a firm to extract the entire consumer surplus for a particular product using two-part tariffs (Smith, 2011, p. 173). Depending on the degree of homogeneity in the market, the fixed amount charged is either equal to or higher than the marginal cost. Consumer surplus refers to the difference between the price that a consumer is willing to pay for a particular product or service and what he or she actually pays (Fisher & Waschik ,2010, p. 45) This paper illustrates how firms use the two-part tariff to extract consumer surpluses. The author attains this by illustrating the concept of two-part tariff when the demand is homogeneous and when the demand is different. Two-part tariffs Monopolies determine the Price (P) of their goods and services by equating Marginal Revenue (MR) to Marginal Cost (MC). That is P=MR=MC. In this case, the price set is referred to as the single-price tariff. By paying the price of a good or service which is equivalent to marginal revenue and marginal cost, a consumer enjoys a certain amount of consumer surplus that is not captured by the seller (Fisher, Waschik & Prentice, 2010, p.44). However, a monopoly can maximize its profit more than a firm that has adopted a single price tariff (Oi, 1971, p.78). Goettler and Clay (2006, p.1) assert that when using the two-part tariff, a firm charges a flat fee and a per-unit tariff. For example, in its operation, Disneyland has adopted a two-part tariff in its pricing. The consumer is expected to pay a certain amount of dollars for example $ T as admission fee. The admission fee gives the consumer the right to purchase a number of rides in the park at price P. Therefore, if the consumer purchases X number of rides, his or her budget equation will be composed of two parts which include XP+Y= M-T where M =consumer income (Oi, 1971, p. 71). The admission fee of $ T represents a privilege tax that extracts a certain percentage of the consumer’s surplus. This means that Disneyland is able to extract a certain proportion of the consumer’s income. Two-part tariff in a homogeneous market Consider a demand equation of a business traveler who uses taxi services to travel to his destination occasionally to be represented a