ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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People do not always use discounts
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Travelers in the same class pay different rates based on their demand
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Business travelers always get big discounts
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All travelers get a discount
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Detailed explanation-1: -If demand for the particular flight is high, then the airline starts putting up the price of that flight. It means that the remaining tickets will only be bought by people willing to pay a higher price (inelastic demand).
Detailed explanation-2: -Airlines charge different prices from different customers due to price discrimination. The airline charges a high price for customers who have inelastic demand, and the airline offers special offers and discounts to people with elastic demand.
Detailed explanation-3: -That happens because passengers have different itineraries, book at different times and of course travel in different classes. But it’s also true that airlines use what’s called dynamic pricing.
Detailed explanation-4: -Do airlines practice price discrimination? Airlines engage in price discrimination by reducing the price on seats that they expect will not be sold.
Detailed explanation-5: -With first-degree discrimination, the company charges the maximum possible price for each unit consumed. Second-degree discrimination involves discounts for products or services bought in bulk, while third-degree discrimination reflects different prices for different consumer groups.