Welcome to week seven of the microeconomics principle's course. Today we're talking to you from the small regional airport at the University of Illinois in Urbana Champaign. This is actually a small airport, we are a university town, we you know, we are a rural community so we don't have a big airport but we do have an airport that actually serves the community here, some of the areas around. And I wanted to start at the airport because today, this, this week we want to talk about pricing and particularly, this pricing strategies the firms have some market power or some degree of flexibility in pricing can actually do. And, and I want to dedicate a whole week to the issue of pricing because it's such a fascinating topic, and one of the most fascinating topics in economics. Talk about the airline, for instance. In 1978 the, the U.S. Government deregulated the airline industry. Up to that point the government have big control over airlines business. They regulated fares, they regulated routes, and the airlines didn't really, couldn't really use market power or market ideas as a way to run their business. Well, in 1978, they actually, the government deregulated the air, the airlines and the airlines began to use a, to use market ideas to regulate their, or to control their business. The safety part, the government still regulate that heavily but in terms of how much to charge and where to fly airlines have complete control over that. And in the issue of pricing no one, no industry has done more emanative and interesting pricing schemes on airlines, a lot of it to,to their advantage. For instance most of the time when you fly in any, you know, any small or large or long route you're probably going to be sitting next to a person that probably did not pay the same amount of money that you paid for that seat. For instance, I know there, I know an interesting case in the case of airlines. If you buy a ticket from here to from here Champagne to Chicago which is about two hours you probably going to end up paying more money than if you buy the same ticket from here to New York City which is about 12 hours from here. So why is that? Another idea that airlines use is like usually airlines try to separate consumers be based on either they're vacation travelers or business travelers. Based on how they actually manage their reservation, how they, they reserve their tickets. So, how do the airlines do that. So, all these fascinating ways in which airlines and other companies figure out the ways that we can price they are good at different you know, in different ways is what we are going to talk about this week. Now one of the questions that I want to kind of the over arching question that we're going to try and answer at the end, is that is this a good thing for society? Is all this different pricing techniques that ultimately businesses are doing it because they care about their bottom line, are all these pricing techniques a good thing for, for society? Are, are, you know, are consumers getting better, and society in general getting better because the airline has such a, this really interesting ways of pricing their goods? That's the question we're going to try to answer at the end, after we have gone over some of the topics that we talk about this week. In this week other course. So I think that you'll find this week one of the most fascinating weeks of the course in the topics of pricing, particularly because you will talk about a lot of the industries that you're more familiar with. Retail, food, and the airline industry will be the big highlight. So hopefully you'll enjoy it. Produced by OCE ATLAS digital media, at the University of Illinois, Urbana Champaign.
