Southwest Airlines estimates the short-run price elasticity of business fares to be 2 and the long-run elasticity

Question:

Southwest Airlines estimates the short-run price elasticity of business fares to be 2 and the long-run elasticity to be 5. Is ticket demand more elastic in the short-run or long-run? Does this seem reasonable? Explain.

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Managerial Economics and Organizational Architecture

ISBN: 978-0073375823

5th edition

Authors: James Brickley, Jerold Zimmerman, Clifford W. Smith Jr

See More Books

Question Posted: Apr 11, 2018 02:43 AM

See More Questions

We can use the price-change formula to predict the effects of a change in demand on equilibrium prices in the short run and long run. Suppose a national advertising campaign increases the demand for...
Why is long-run price elasticity of supply greater than short-run price elasticity of supply?
Elasticity problems: a. The world demand for crude oil is estimated to have a short-run price elasticity of 0.05. If the initial price of oil were $100 per barrel, what would be the effect on oil...
Our model of pollution in this chapter assumed that emissions are a pure private bad, and that people have no ability to protect themselves from the adverse consequences of exposure. In reality,...
Each Tuesday, Ryan Airlines reduces its one-way ticket from Fort Wayne to Chicago from $125 to $40. To receive this special $40 price, the customer must buy a round-trip ticket. Ryan has a...
The financial manager of Solsken is evaluating a proposal to purchase a new solar machine unit that has a lifetime of 10 years. The new machine would allow the company to make cost savings of SKr4...
Table B. 25 contains the golf data on strokes gained. Use all possible regressions to build a model for these data. Perform a residual analysis on the final model and comment on model adequacy. SG:...
On March 1, 2014, Peppers Deli loaned $18,000 to Simms Supply for one year at 5 percent interest. Required Answer the following questions. a. What is Peppers interest income for 2014? b. What is...
(1) A borrower finds that the incremental cost of borrowing an extra $10,000 is 14%. If the borrower can earn 12% on alternative investments of comparable risk should he borrow the extra $10,000 at...
The fixed-end bar ABCD consists of three prismatic segments, as shown in the figure. The end segments have cross-sectional area A1 = 840 mm2 and length L1 = 200 mm. The middle segment has...
Gasoline prices increased substantially in 2004 and 2005. What adjustments did people make to minimize the long-term effects of this price increase?
Assume that demand for product A can be expressed as Q A = 500 5P A + 3P B and demand for product B can be expressed as Q B = 300 2P B + P A . Currently, market prices and quantities for these...
Consider the database shown in Figure 1.2, whose schema is shown in Figure 2.1. What are the referential integrity constraints that should hold on the schema? Write appropriate SQL DDL statements to...
What are some reasons why understanding the organization of the Internal Revenue Code may prove useful in the accounting world no matter what your job title is ?
Suppose the 3-month interest rate (i) is 4%/year in New York and 8% in Frankfurt, and the $/ FD = 2%/year. A US investor would then invest in Frankfurt by purchasing spot and at the same time selling...
Listed below are eight firms that are currently operating in the market. The market share of each firm is listed in the table below. Firm Market Share Bird 16 Cat 11 Dog 8 Horse 4 Pig 5 Cow 10 Tiger...
A panel of doctors announces that lookiThe price of steel used to make Stanley tumblers rises sharply. How will this affect the market for water bottles?ng at a screen for too long can affect your...
10. Label and explain in details the following diagram A 12. 1 Give three functions of E. Zinc E B + C D Copper 13. Give an ideal principle of predicting a performance of a fuel cell and give an...
If an object has a smaller density than water, will the object stay fully submerged, partly submerged, or rise completely out of the water when it is released underwater? Explain.
In Exercises 15 through 30, find the derivative dy/dx. In some of these problems, you may need to use implicit differentiation or logarithmic differentiation. y ex + et -2x 1 + e
Suppose in Table 7.2 (Product Bundling) that the professional user values Microsoft Trip Planner at $30 rather than $20. Keep all other valuations the same. Are there still obvious advantages from...
The Hewl-Pact Company produces a popular printer than prints over 100 pages per minute. It recently announced that it was introducing a lower priced model of the printer that can print 30 pages per...
Jan van der Schmidt was the founder of a successful chain of restaurants located throughout Europe. He died unexpectedly at the age of 55. Jan was sole owner of the company's common stock and was...
Work out which number line below shows the values that x can take if 3 x 2. - A +12345678910 8 9 10 B D 5 6 7 8 9 10 6 7 8 E 2 F 3 4 7 8 9 10 1 2 3 4 5 6 7 8 9 10
Application Case Coffee Shop is a company dedicated to the commercialization of "signature coffee", a category of high quality coffee that is grown, processed and prepared with a high degree of...
The issuing company Zapatos y Bolsas Veloz, SAB de C.V., dedicated to the manufacture and sale of vinyl leather bags for more than 25 years under the Bolsas Finas brand, the company obtained in the...

Southwest Airlines estimates the short-run price elasticity of business fares to be 2 and the long-run elasticity

Question:

Step by Step Answer:

Fares are more elastic in the long run Suppose Southwest raises prices In the shortrun ...View the full answer

Managerial Economics and Organizational Architecture

Students also viewed these Business questions