The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:
A) collect less revenue from short-notice travelers.
B) collect more revenue from travelers who book well in advance.
C) lose money on short-notice travelers.
D) collect less revenue from travelers who book well in advance.

Question

Quizplus · Accepted Answer

In the short run, demand is inelastic (0.05), so revenue increases with price hikes. In the long run, demand is elastic (2.36), so revenue decreases as consumers are more responsive to price changes.

The Short-Run Price Elasticity of Demand for Airline Travel Is