Economics, 3rd Edition

Why Does the Price of Train Travel Vary at Different Times of the Day?

In many countries the price of a train journey varies at different times during the day and the week. A ticket for a 

seat on a train from Birmingham to London between 6.00am and 9.00am is around £80 (

€99), whereas for the 

same journey leaving at midday the price is between £10 and £20 (

€12 and €24). Train operators know that the 

demand for rail travel between 6.00am and 9.00pm is higher than during the day time but they also know that 

few commuters have choices about when they have to arrive at work or to meetings, conferences and so on. 

An individual can use other forms of transport such as their car or a coach but the train is often very convenient,  

so the amount of substitutes is considered low. The price elasticity of demand for train travel early in the morn-

ing, therefore, is relatively low compared to at midday. In the morning, train operators know that seats on trains 

will be mostly taken and there will be very few left empty, whereas during the day it is much more likely that 

trains will be running with empty seats. Knowing that there is a different price elasticity of demand means that 

train operators can maximize revenue at these different times by charging different prices.

Figure 4.15 shows the situation in the market for train travel. Panel (a) shows the demand and supply 

for tickets between Birmingham and London between 6.00am and 9.00am. The demand curve D

i

 is very 

steep indicating that the price elasticity of demand is relatively low. At a price of £80, 1,000 tickets are 

bought and as a result the total revenue for the train operator is £80,000.

Panel (b) shows a demand curve D

e

 with a similar supply curve. Ceteris paribus, the train operator has the 

same number of trains available at all times during the day but notice that the supply curve is relatively steep 

and therefore inelastic because although the operator has some flexibility to increase the number of trains avail-

able and thus seats for passengers, there is a limit as to how far the capacity can be varied throughout the day.

If the train operator charged a price of £80 after 9.00am, the demand for tickets would be very low at 

100. Total revenue, therefore would be £8,000 and there would be many seats left empty. This is because 

the train operator effectively faces a different market during the day. Those who travel by train at this time 

may have a choice – they might be travelling for leisure or to see friends and they do not need to travel by 

train unlike those in the morning who have to get to work at a certain time. These passengers are price 

sensitive – charge too high a price and they will not choose to travel by train but offer a price that these 

passengers see as being attractive and which to them represents value for money and they may choose 

to buy a train ticket.

If the train operator, therefore, set the price for train tickets after 9.00am at £40 the demand for train 

tickets would be 800 and total revenue would be £32,000. If we assume that train operators are acting 

rationally then they would prefer to generate revenue of £32,000 rather than £8,000 and so it would be 

more sensible for them to charge a lower price to capture these more price sensitive passengers.

SELF TEST 

How might a drought that destroys half of all farm crops be good for farmers? If such a drought is 

good for farmers, why don’t farmers destroy their own crops in the absence of a drought?

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