Question

A famous museum in India charges a high entry fee from the foreign tourists and low entry fee from Indian tourists.

1. Identify and briefly describe the phenomenon evident here.
2. Name the market in which the phenomenon referred to in subpart (a) is applicable.

Answer 1

1. The phenomenon is price discrimination specifically third‑degree (group) price discrimination: the museum charges different prices to different groups (foreign tourists vs Indian tourists) for the same service, not because of different costs but because it segments consumers by an observable characteristic (nationality) and charges different prices accordingly.
2. This practice is typical of a discriminating imperfect‑competition market, i.e., a firm with some market power that can segment markets and prevent easy resale. Price discrimination is possible and commonly arises under monopoly or when sellers can separate buyer groups with different demand elasticities.