A key assumption of yield management is that demand is:

• A. Inelastic
• B. Price-insensitive
• C. Fluctuating and forecastable
• D. Constant

Answer: (C)

Yield management relies on the idea that demand for rooms or seats varies over time and that those patterns can be forecast from data. Because demand rises and falls with seasons, events, and other factors, you can anticipate peaks and troughs and adjust pricing and inventory to capture more revenue. If demand were inelastic or price-insensitive, changing prices wouldn’t much affect demand; if it were constant, there’d be no opportunity to optimize revenue through pricing or availability controls. So the best choice is that demand is fluctuating and forecastable.