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 travellers.
B) collect more revenue from travellers who book well in advance.
C) lose money on short-notice travellers.
D) collect less revenue from travellers who book well in advance.

Question

Quizplus · Accepted Answer

In the long run, demand is more elastic (2.36), so a significant price increase will lead to a proportionally larger decrease in quantity demanded, reducing revenue from advance bookings.

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