During the summer of 1978, the airlines had a large increase in revenues after introducing a large number of bargain fares.Which of the following is a possible explanation?
A)Demand was price inelastic.
B)Demand was price elastic.
C)The demand curve had shifted leftward.
D)All the above.
E)None of the above.

Question

Quizplus · Accepted Answer

If the airlines experienced a large increase in revenues after introducing bargain fares, it indicates that the demand for air travel was price elastic. This means that consumers are sensitive to changes in price, and lowering fares led to an increase in the quantity demanded, resulting in higher revenues for the airlines. Option A is incorrect because if demand were price inelastic, lowering fares would not have a significant impact on revenue. Option C is also incorrect as the leftward shift in the demand curve would result in a decrease in both quantity demanded and revenue. Option D is incorrect as only option B explains the increase in revenue.

During the Summer of 1978, the Airlines Had a Large