The basic structure of this research was based on net profit function of education. Under the consideration of the two factors- merit wants and externalities effect, the researcher derived the law of optimal price from different student groups, separated by different level of family incomes. The researcher also made a comparison between the results of two situations, the one involved with merit wants and externalities effect and the one without. The research honestly expects the finding of this study will be adopted as the optimal principle of price discrimination theory for higher education institutes.According to the result of having merit wants and externalities effect concerned, it showed low-income families received lower education for paying lower price. When compared to the result from the situation without merit wants and externalities effect involved, the differential prices between two groups were bigger, but the quantities shown were smaller.