Reducing Price To Increase Demand

Recently, WestJet has reduced ticket prices for certain flights by 15%. WestJet has done this in hopes of increasing demand for these flights, as they have been flying planes that are not reaching full occupancy.When selling a product, in this case flight tickets, the more you sell the

Image Source: Google Images

Image Source: Google Images

better. This is because with increased quantity comes decreased average total cost per product, to a certain point. If only a small quantity of a product is sold, the average cost of production per unit is higher. This is why limited edition luxury products can be sold at extremely high prices. WestJet has noticed that their planes are not being flown at full occupancy, which increases their costs. To clarify, they still have the same production and operations cost, but less revenue to cover it. By decreasing the ticket price they hope to induce more customers into the market, thus filling their planes to full capacity and increasing revenue. For a business to make profit it is essential to exceed their break-even point, where revenue equals cost. WestJet hopes that this price cut will result in a high enough demand to make a profit.

See Article:

Leave a Reply

Your email address will not be published. Required fields are marked *