Answer to Question #299921 in Microeconomics for Shinu

Question

Snacks and Cold Drinks are much more expensive at airports and multiplexes than in a retail shop, even though they cost a similar amount to producers”. Is this scenario realistically feasible? Which market structure(s) do you think this is commonly observed? How would you explain the producer behavior in such markets? Logically analyze your argument and draw graphs if necessary.

Answer 1

This is realistically feasible and is called market segmentation.

Market segmentation is common in monopoly market structure.

The monopolist producer analyzes his consumers and classifies them into different groups. He/she then charges different prices for the same product in the different groups as the different groups will be willing and able to buy the product at different prices.