Differential cost entails the difference that prevails between costs of two substitute decisions or alteration of levels of output. It applies when multiple options worth pursuing prevail, while a choice should be made for selecting one alternative and dropping the ones (Pettinger) . Thus, for this practice, the differential costs would result from the difference that would emerge after choosing either of the three flier frequent programs and discording the others. By pursuing one option, the dropped programs would depict the differential costs.
Opportunity costs refer to the potential loss of gains from other alternatives after choosing one alternative (Pettinger) . From the scenario, opportunity costs would emerge from the losses realized by dropping two of the three programs and remaining with one alternative. The loss from the dropped programs would depict the opportunity costs.
Delegate your assignment to our experts and they will do the rest.
By refraining from engaging in the act of upgrading the frequent flier programs during incidences of high volume passengers one, three, or five days in advance, the opportunity costs that would emanate from the practice revolve around the costs incurred for failing to pursue any of the alternatives. In this case, the opportunity costs would relate to the losses experienced by declining to adopt any of the programs in the event of high volume passengers.
Variable costs refer to costs that vary based on the output level (Pettinger) . In this sense, in the event that a passenger is walking up to the gate at the last minute, it would be unwise to sell the ticket based poon variable cost. The reason for this is that the customer would lead to increased costs of operation, which would make the airline operations costly.
Reference
Pettinger, T. Cracking economics . London: Octopus Books, 2017.
