The elasticity of demand for economy class transatlantic air travel is equal to .62 (for first...
The elasticity of demand for economy class transatlantic air travel is equal to .62 (for first class, it is .40). Do you think it will raise revenues for the airlines if they raise the price of these tickets? Explain.
Homework Answers
The demand for economy class transatlantic air travel is inelastic because the value of elasticity of demand is less than 1. When demand is inelastic, the % change in quantity is lower than the % change in price. In such cases, increasing the price leads to higher revenue. So, in this case revenue will increase because of increasing the price.
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The elasticity of demand for economy class transatlantic air
travel is equal to .62 (for first...
Consider the demand for leisure air travel versus business air travel. a. Which of those...
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....
Discuss in the context of the income elasticity of demand for air travel, the effect on...
Discuss in the context of the income elasticity of demand for air travel, the effect on the revenue of airlines given that there is a large decrease in the income of consumers. Does your answer depend on the price elasticity of demand for air travel? Explain using a suitable air travel market diagram.
The price elasticity of demand for leisure air travel is 1.60. Therefore, a
The price elasticity of demand for leisure air travel is 1.60. Therefore, a A 10 percent decrease in the price of leisure air travel will cause a 16 percent decrease in the amount of leisure air travel.B. 10 percent decrease in the price of leisure air travel will cause a 16 percent increase in the amount of leisure air travel. C. 16 percent decrease in the price of leisure air travel will cause a 10 percent increase in the amount of leisure...
By considering the determinants of the price elasticity of demand, explain whether the demand for air...
By considering the determinants of the price elasticity of demand, explain whether the demand for air travel is price elastic or price inelastic. You may consider both the business travelers and the leisure travelers when analysing their price elasticities of demand.
Consider a tourism-dependent economy where the air travel industry is affected by two incidents which occur...
Consider a tourism-dependent economy where the air travel industry is affected by two incidents which occur concurrently. One incident is the economy runs into a recession and unemployment had increased significantly. Another incident is the strike by pilots after the collapse of discussions between the pilot unions and the airlines management. Discuss with suitable air travel market diagrams the effects of these two incidents on the equilibrium price and quantity of the air travel market. Your diagrams should reflect the...
For each of the following cases, calculate the point price elasticity of demand, and state whether...
For each of the following cases, calculate the point price elasticity of demand, and state whether demand is elastic, inelastic, or unit elastic. The demand curve is given by QD = 5,000 – 50 PX a. If the price of the product is $50. b. If the price of the product is $75. 2) For each case, should the firm raise or lower the prices to maximize revenues? Why or Why not? Explain. 3) Suppose the income elasticity of demand...
A service provider finds out income elasticity of Demand for its product is equal to -0.75....
A service provider finds out income elasticity of Demand for its product is equal to -0.75. The area’s economy likely to experience a recession and the firm will not be able to avoid its impact. First, what will happen to the market price and quantity of the firm’s output (typical demand and supply graph)? Support your answer graphically. If the authorities fix the price at the original value, what would be the impact of that on the market?
1.If the price elasticity of demand for hamburgers is 1.5 and the quantity demanded of hamburgers...
1.If the price elasticity of demand for hamburgers is 1.5 and the quantity demanded of hamburgers equals 40,000, what will happened to the quantity of hamburgers demanded if the price increases by 10%? What is the change in quantity? Briefly explain your answer. 2. Sport team want to boost revenues from ticket sales next academic year and hire you to advise the team whether to raise or lower ticket prices next year. If the elasticity of demand for Tiger games...
Draw a supply and demand graph for the market for air travel. Analyze the impact of an...
Draw a supply and demand graph for the market for air travel. Analyze the impact of an increase in the cost of jet fuel. Be sure to use just one graph, shifting either the demand curve or the supply curve the correct direction. Show the impact on equilibrium price and equilibrium quantity. Draw a supply and demand graph for new cars to show the impact of lower consumer incomes during the 2008-09 recession. Analyze the impact of a decrease in tariffs (taxes) on...
1.If the price elasticity of demand for hamburgers is 1.5 and the quantity demanded of hamburgers equals 40,000, what will happened to the quantity of hamburgers demanded if the price increases by 10...
1.If the price elasticity of demand for hamburgers is 1.5 and the quantity demanded of hamburgers equals 40,000, what will happened to the quantity of hamburgers demanded if the price increases by 10%? what is the change in quantity? Briefly explain your answer. 2. Sport team want to boost revenues from ticket sales next academic year and hire you to advise the team whether to raise or lower ticket prices next year. If the elasticity of demand for Tiger games...
1.If the price elasticity of demand for hamburgers is 1.5 and the quantity demanded of hamburgers equals 40,000, what will happened to the quantity of hamburgers demanded if the price increases by 10%? what is the change in quantity? Briefly explain your answer. 2. Sport team want to boost revenues from ticket sales next academic year and hire you to advise the team whether to raise or lower ticket prices next year. If the elasticity of demand for Tiger games...
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