CAT 1999 — VARC Question 6
Directions: Read the short passages given below and answer the question that follows it.
Three airlines — IA, JA and SA — operate on the Delhi- Mumbai route. To increase the number of seats sold, SA reduced its fares and this was emulated by IA and JA immediately. The general belief was that the volume of air travel between Delhi and Mumbai would increase as a result.
Which of the following, if true, would add credence to the general belief?
Answer & solution
- A
Increase in profitability of the three airlines.
- B
Extension of the discount scheme to other routes.
A study that shows that air travellers in India are price-conscious.
- D
A study that shows that as much as 80 per cent of air travel in India is company-sponsored.
(c) is the correct answer choice.
All three airlines have reduced their fares to make up for this loss in increased volumes. This decision is obviously based on the general belief or assumption that air travellers in India are price-conscious. If there is a market research study that shows exactly that, then it would add credence to the general belief.
(a) The general belief relates reduced fares to increased volumes, not to increased profitability. It is possible to increase profitability by cutting costs, even if volumes do not increase. Hence, the cause – and – effect relationship between reduced fares and increased volumes is not directly supported by this statement.
(b) and (d) are irrelevant and do not in any way support or weaken the general belief.