Even though they operate from out-of-the-way airports and offer few extra services, discount, no-frill airlines like Ryanair and
EasyJet have been successful. Consumers obviously consider A. the schedules these airlines offer to be the most convenient in the industry.
B. the long-term relationships established by these airlines to be a critical benefit.
C. the prices to be slightly lower, but not low enough to have much influence.
D. the benefit of lower prices to be greater than the cost of reduced services and less convenience.
E. the major airlines to be worthless
Answer: The correct answer is "D. the benefit of lower prices to be greater than the cost of reduced services and less convenience.".
Explanation: Consumers obviously consider the benefit of lower prices to be greater than the cost of reduced services and less convenience.
Discount and no-frills airlines have less costs to cover so they can offer lower and more affordable prices for consumers. These airlines have been successful because it turns out that consumers value or prefer the lower price rather than the additional services.
If interest rates are increased then it will tend to discourage investment because investment has a higher opportunity cost. With higher rates, it is more expensive to borrow money from a bank. Saving money in a bank gives a higher rate of return.
Answer: None of these descriptions is accurate for Erik as he does not care about the level of risk involved and is indifferent to all the investment options and their risks.
Devin is risk averse as he decides to choose the safest option which is keeping the money as cash for one year.
