Final answer:
Revenue management is the strategy of using dynamic pricing to adjust prices in response to varying capacity and demand, ensuring that businesses can maximize profits from perishable inventory without incurring waste.
Step-by-step explanation:
Using dynamic pricing in response to capacity variability to ensure that perishable inventory is not wasted is known as Revenue management. This strategy involves setting flexible prices for products or services based on current market demands. Businesses use revenue management to maximize the amount of money they make from their inventory, particularly when dealing with items that cannot be sold after a certain period, like airline seats or hotel room nights. This approach takes into account the costs of changing prices, known as menu costs, along with the potential customer reactions to price fluctuations. Dynamic pricing allows companies to adjust prices in accordance with various factors, such as remaining time before a service is provided, the level of demand, and the number of available units.