Case Study Econ 545 Week 2 Essay

1857 Words Dec 20th, 2013 8 Pages
Case Study: Ethical Issues in Business, Week 2
Keller Graduate School of Management
ECON545, November 13, 2013

Price Discrimination
An ethical issue that individuals face today involves the price war or price discrimination involving the airline industry. According to the legal definition of price discrimination: Price discrimination is the practice of charging different persons different prices for the same goods or services. Price discrimination is made illegal under the Sherman Antitrust Act. 15 U.S.C. §2, the Clayton Act, 15 U.S.C. §13, and by the Robinson-Patman Act, 15 U.S.C. §§13-13b, 21a, when engaged in for the purpose of lessening competition, such as tying the lower prices to the purchase of other goods or services.
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Airline companies also utilize the to-and-from destination to determine rate, major cities and if the locations are consider touristic places. Most of the operational costs for most airline companies are fixed and would be required whether it has one passenger booked or the entire flight booked. That is why the airline companies do their best to sell as many seats as possible at the most profitable price that they can charge to minimize any surplus of empty seat. (Tejvan Pettinger, 2013)

Chapter 3 Question 15
Nobel Prize winner Gary Becker and Judge Richard Posner (“How to Make the Poor Poorer,” The Wall Street Journal, January 26, 2007, p. A11) suggested that “unions strongly favor the minimum wage because it reduces competition from low-wage workers (who, partly because most of them work part time, tend not to be unionized) and thus enhances unions’ bargaining power.” They further argued that “although some workers benefit—those who were paid the old minimum wage but are worth the new higher one to the employers—others are pushed into unemployment, the underground economy or crime. The losers are therefore likely to lose more than the gainers gain; they are also likely to be poorer people.” Are both of these statements consistent with the model of price floors discussed in this chapter? Why or why not?
According to Stone when businesses provide consumers with the quantity of goods they

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