5 ECONOMIC CONCEPTS APPLIED IN - RAILWAY

 ECONOMIC CONCEPTS APPLIED IN RAILWAY

MARKET STRUCTURE – MONOPOLY MARKET:

Indian Railway is the only company in Indian Market for railway transport. It has created a restricted entry barrier and provides a unique value proposition to Indian customers. It has control over its price and use downward sloping demand curve. It follows all the criteria of monopoly market.

PRICE DISCRIMINATION ON THE BASIS OF MARKET/SEGMENT:

Indian Railway follows the concept of price discrimination based on market/segments as it provides tickets at different prices to different customers based on their age i:e, senior citizen, adult, children, etc and also on physical health disabilities.

PEOPLE RESPOND TO INCENTIVES:

When Indian Railway gives offers to tickets for travelling in a particular season or in particular train. People tends to buy more tickets in that occasion and grab the opportunity.

PRICE ELASTICITY:

Indian Railway functions as a monopoly so there is no other competitor so it follows the concept of inelastic price elasticity and its pricing is totally controlled by them.

RATIONAL PEOPLE THINK AT MARGIN:

Admitting one passenger to AC-3 tier on a tatkaal basis after the original ticket is cancelled (or transferring a person from sleeper class to AC-3 tier) will generate additional revenue to the railways, (as otherwise the seat would have remained empty), while the cost of providing service to the passenger is virtually zero since that is already existing and nothing additional is done. This is a wise and rational decision on part of railways.