An airline company
A) cannot price discriminate because it is against the law.
B) price discriminates by charging higher prices to business travelers.
C) price discriminates by charging lower prices to business travelers.
D) price discriminates even though its profits are lower because competition forces it to do so.
E) has fewer customers because it price discriminates than it would have if it did not price discriminate.

Question

Quizplus · Accepted Answer

Airline companies frequently engage in price discrimination by charging higher prices to business travelers who have a relatively inelastic demand for air travel and are willing to pay more for flexible schedules and premium services. This allows the company to charge lower prices to price-sensitive leisure travelers, increasing its overall revenue and profitability. However, this practice is not illegal and is widely used in the industry. Option A is incorrect because price discrimination is legal. Option C is the opposite of what actually happens, as airlines charge higher prices to business travelers. Option D is incorrect because companies only engage in price discrimination when it benefits their profits. Option E is false because price discrimination often allows airlines to attract more customers by offering lower prices to price-sensitive individuals.

An Airline Company