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Why does the same flight ticket have two different prices?
- Suppose you book a flight ticket to Goa.
- Booked 3 months before, it costs Rs 5,000 .
- Booked 1 day before, the same ticket costs Rs 8,000 .
-
3 months before
- Many tickets are available, so supply is high .
- Few people are booking, so demand is low .
- Supply is more than demand, so the price is low.
-
1 day before
- Many tickets are already booked, so few are left and supply is low .
- People still want tickets, so demand is high .
- Demand is more than supply, so the price is high.
| Booking time | Supply | Demand | Price |
|---|---|---|---|
| 3 months before | High | Low | Rs 5,000 |
| 1 day before | Low | High | Rs 8,000 |
- Prices do not change randomly. They react to what people want (demand), how much is available (supply), and more.
What will we learn in this chapter?
- Demand and supply in detail
- How demand and supply are related
- How they affect price
What is the name of this chapter, and how is it related?
- The Price Puzzle: What Drives the Market
- The Price Puzzle - why the same ticket costs Rs 5,000 one time and Rs 8,000 another.
- What Drives the Market - what moves prices. The answer is demand and supply.
1. Prices of all goods are decided by ______ and ______.
Show answer
Demand and supply.
2. Why is a ticket booked 1 day before costlier?
Show answer
Few tickets are left (low supply), but people still want them (high demand).
3. True or false: Prices change randomly.
Show answer
False. They react to what people want (demand) and how much is available (supply).
📝 What Have We Learned
- The same ticket costs less when supply is high and demand is low.
- It costs more when supply is low and demand is high.
- This chapter explains demand, supply and how they set prices.
