|INSTRUCTOR DISCUSSION NOTES:
Chinese Airlines: What's It Take To Make a Yuan here?
1.What impact would yield management (price discrimination) have on Chinese airline revenues? Why?
Should increase revenues, because under the tenets of yield management, ticket prices should fall for demand-elastic customers, and should rise for demand-inelastic customers.
2.What will happen to wages paid for Chinese pilots over the next few years until the shortage is eliminated? Draw a graph of supply and demand in the market for Chinese pilots.
Wages should increase significantly until the shortage disappears, at which point pilot wages will fall.
3.As Chinese airlines begin to merge with each other--as several have already done to alleviate some of the cost concerns stated in the article, consumers will face changes in available choices, available flights, and market prices. As a result, what will happen to elasticity of demand for airline travel? Why?
Elasticity of demand should fall as available options for consumers falls.
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