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- (C) Do you think LCC in the Middle East is moving toward "perfect price discrimination"? Please provide your arguments.
- (B) Please define "price discrimination", and 3 conditions for this strategy to be effective.
- Please read the article above and answer the following questions. (30)
Low-cost aviation in the Middle East (Economist, 2013)
In many parts of the world, low-cost carriers are synonymous with no-frills flying. The liberalisation of the
world's more mature aviation markets has resulted in intense competition on short-haul sectors, prompting
cost-conscious airlines to strip out all but the most sential services. The Middle East has yet to tear down its
aviation regulations, so its new breed of low-cost carriers has developed a less Spartan ethos.
"In this world, you don't have a one-size-fits-all model," says Marwan Boodai, chairman of Jazeera Airways, a
Kuwaiti low-cost carrier founded in 2005. Along with three other low-cost carriers--UAE-based FlyDubai and
Air Arabia, plus Saudi Arabia's Nas Air--Jazeera is trving to inject competition into a marketolace stli
dominated by state-owned legacy airlines. It is not easy. "Our consumers have high expectations with the
low-cost model," Mr Boodai notes, quipping that withholding caviar is one way of trimming costs. (He is only
half ioking:the big three Gulf airlines-Ethad, Emirates and Qatar Airways-all dish out the black stuff in first
class.)
No luxury for Jazeera's customers, then, but more the occasional frill to keep them content. The Kuwaiti
airline gives its passengers a whopping free-baggage allowance of 40kg on short-haul flights. That also
includes complimentary on-board meals. This emphasis on preserving quality is epitomised by the rise of
business-class products. Nas Air offers three different fare types with vanying degrees of flexility. Jazeera
reserves a section of its all-economy-configured aircraft for premium traffic, leaving middle seats vacand
separating the classes with a curtain. FlyDubai took this one step further in June, unveiling a dedicated
business-class cabin with larger, more extravagant seats. "The middle-seat option was not something that
appealed to us," says the boss of FlyDubai. "We low-cost because of how we manage ourselves. But to be be
seen as a product of Dubai, we must do things properly."
a. Please use economic concepts to explain why product differentiation can help a low-cost carrier (LCC) maintain its competitiveness.
- 10. In 2007, interest rates in Germany were 4.7 percent while the inflation rate was 1.7 percent. In 2008, interest rates increased to 5.3 percent and the inflation rate increased to 2.0. As a result, there is
(A) a leftward shift in Germany's demand for money curve.
(B) a downward movement along Germany's demand for money curve.
(C) a rightward shift in Germany's money supply curve.
(D) an upward movement along Germany's demand for money curve.
- 9. If the government runs a budget deficit, then
(A) national saving is negative.
(B) household but not business saving must pay for the deficit.
(C) part of household and business saving finances the deficit.
(D) national saving cannot fund investment.
- 8. Which of the following statements is correct?
(A) If duopolists successfully collude, then their combined output will be equal to the output that would be observed if the market were a monopoly.
(B) Although the logic of self-interest decreases a duopoly's price below the monopoly price, it does not push the duopolists to reach the competitive price.
(C) Although the logic of self-interest increases a duopoly's level of output above the monopoly level, it does not push the duopolists to reach the competitive level.
(D) All of the above are correct.
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