The railway freights are fixed on the principle of “What that traffic will bear”. By the phrase “what the traffic will bear” is meant the fixation of railway rates according to the freight bearing capacity of each service performed by the railway.
Railways, for example, carry different classes of passengers and different kinds of goods. The paying capacity of each passenger is different. A rich passenger can afford to pay higher fare than the poor. Similar is the case with the other commodities. Some commodities are highly valued and others are low priced. A highly priced commodity can stand a higher charge than a low priced commodity.
For example, railways carry gold as well as coal. The gold is highly valued and the coal is very low priced. If a uniform rate carrying all kind of goods and for all classes of passengers are fixed, it may not be possible to cover the total cost. The railway acts on the principle of “what that traffic will bear”. It charges different rates according to the freight-tearing capacity of each service of good and thus maximizes its profits.