An article in the Wall Street Journal noted the following: Instead of relying on a full-coach, round-trip unrestricted fare of about $2,000 between Cleveland and Los Angeles ...Continental [Airlines] since June has offered a $716 unrestricted fare in that market ....Through October, the test resulted in about the same revenue that Continental thinks it would have collected with its higher fare.
Source: Scott McCartney, "Airlines Try Cutting Business Fares, Find They Don't Lose Revenue," Wall Street Journal, November 22, 2002.
What is the absolute value of the price elasticity of demand on this airline route?
A)0
B)less than 1
C)greater than 1
D)approximately 1

Question

Quizplus · Accepted Answer

The test resulted in about the same revenue, indicating that the percentage change in quantity demanded was approximately equal to the percentage change in price, which implies a price elasticity of demand of approximately 1.

An Article in the Wall Street Journal Noted the Following