Reflective Exercise: students’ rail fares –Branson’s good deed?
1
Scenario
Rail companies offer discounted fares to students on certain journeys. Are the rail
companies being kind to students in offering cheaper fares with young persons’
railcards?
Take a note of your responses in your own hard copy
Section 1: Setting the framework for investigating this question
a
b
c
d
A Which of the following is more applicable to economic modelling? (More
than one may be)
We need to examine student users compared to standard users, various
other types of rail users such as the retired and families, and the various
fares available at different times.
We need to examine students compared to standard users and ignore
other complications.
Before analysing this question we need to know much more about the rail
fare structures.
We will start by assuming that the rail companies are acting in the interests
of their customers since customers are the key to any business.
B Cross out the incorrect option in these sentences:
1. People are willing to pay the same/different prices than others to go on a
particular rail journey.
2. Students are more/less price sensitive that the ‘average’ person.
3. The demand curve for rail journeys for students is more/less elastic that the
‘average’ person’s.
C Which of the following are true? (More than one may be)
In deciding the profit maximising price the rail company will have to:
a Establish the marginal journey that gives the highest profits from that
journey.
b Sell tickets for each additional journey where they make a profit, no
matter how small.
c Put aggregate marginal revenue = aggregate marginal cost. (That is treat
all customers together.)
d Realise that for students because their demand is different so is the
marginal revenue compared to standard rail users and this will affect the
price they can be charged.
 Feedback
Copyright: Embedding Threshold Concepts Project
11/09/08
This project is funded by the Higher Education Funding Council for England (HEFCE) and the Department for Employment and
Learning (DEL) under the Fund for the Development of Teaching and Learning.