Question: As the new Millennium approached, there was a lot of excitement but also there were some concerns what would happen to computer-based systems when clocks moved from 1999 to 2000. The concern was due to the way dates were represented in computers. There had been an expectation that many people would use the new Millennium as an excuse for a major holiday. However, Millennium holiday prices in Britain were slashed after a slump in demand for breaks over Christmas and the New Year. The UK's biggest holiday company, Thomson, has admitted that demand had all but dried up. The company initially offered some half-price deals and later made even larger discounts. Airtours, the second largest player, said bookings for the Millennium period were lower than for a normal Christmas - New Year period. Some hotel groups complained that many consumers failed to take advantage of the biggest excuse for a party in a thousand years.
Excessive prices appear to have scared off would-be holiday makers. Brochure prices for a fortnight in the Mediterranean, for instance, were hiked to pound 600 per person about pound 200 higher than in a normal year. However, both Airtours and Thomson said that long haul bookings to destinations such as Australia and the US had sold well, as had packages at the upper end of the price range.
Just before the Millennium, a spokesperson for Thomson said, "We don't think people are frightened of flying over the millennium period - although our planes won't be in the air at midnight as we think passengers will want to be celebrating on the ground. There just seems to be a general reluctance to travel. People have decided they want to stay home with their families."
(a) Using a demand curve diagram, explain why Thomson cut its prices for Millennium holidays in November 1999.
(b) Suggest other factors, apart from price, that were likely to have affected demand for Millennium holidays from Thomson.
(c) Using a diagram, discuss the amount of consumer surplus a holiday maker is likely to have enjoyed if the holiday had been booked at full price in June 1999, or had been booked at half price in December 1999.