Consider the demand for leisure air travel versus business air travel.

a.        Which of those two would have a more elastic demand? Base your answers on the determinants of the price elasticity of demand. (Omit any discussion of factors that would not be relevant to leisure or business air travel).

b.        What would airlines do in terms of their ticket prices for leisure versus business travel if they wanted to increase their total revenue? Explain your reasoning.

c.        When a particular airline charged a price of $405 on a route, an average of 222 tickets per flight were sold. When it increased the price to $495, the number of tickets sold fell to 178. What is the price elasticity of demand for this airline in this case? Given an interpretation of the calculated elasticity.

d.        In what range would the income elasticity for leisure air travel fall? Explain briefly.

Answer rating: 100% (QA)

The detailed answer for the above question is provided below Air Travel Demand and Elasticity a Elasticity Comparison Leisure air travel is generally considered to have a more elastic demand than busi... View the full answer