During the 1990s, Several Airlines Were on the Brink of Bankruptcy

question 32

Essay

During the 1990s, several airlines were on the brink of bankruptcy. These same airlines were giving away millions of dollars in free airline travel through their frequent-flyer programs. Do you think it would have been a good idea for these airlines to eliminate their frequent-flyer programs in order to earn higher profits? Explain.

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Definitions:

Supply Functions

Mathematical expressions that relate the quantity of a good that producers are willing to sell to the price of the good and other factors.

Demand Functions

Mathematical representations that describe the relationship between the quantity demanded of a good and its determinants like price, income, and preferences.

Price Ceiling

A government-imposed limit on how high a price can be charged for a product, service, or commodity.

Economic Efficiency

A situation where resources are allocated in the most effective way, maximizing total benefits while minimizing waste and costs.