posted by Jamie on .
Suppose that flying a 200-seat plane across country costs the airline $100,000. Thus, the average cost of each sear is $500. A plane is about to take off with 10 empty seats. Astandby passenger is waiting at the gate willing to pay $300 for a seat. Should the airline sell it to him? Explain. Should the airline sell him the seat for $50? Explain
Of course the airline should sell the standby passenger a seat -- at whatever price the customer is willing to pay. His ticket price is simply additional revenue added on to the revenue the company has already collected from the other passengers. The additional passenger doesn't add to the airline's cost of flying this plane.
Thanks Ms. Sue