In the mid-1990s,WestJet chose to compete head-on with Air Canada by launching WestJetLite,an alternative low-fare commercial airline passenger operation.Top executives at WestJet had expected its no-frills operation to break even within a year of its inception,but the airline fell short of the goal.A source close to the company explained it by saying,"Its costs were too high,and its revenues were too low." Some observers criticized WestJetLite's marketing efforts.When the no-frills service was first launched,it lacked a distinct name or identity,missing its chance to make a splash.Then WestJet tried to sell three "brands" at once-Plush ,a new premium service,and its more traditional long-haul domestic flights.As one rival expressed it,"You cannot be all things to all people."
-Refer to WestJetLite.Consumers who travelled on WestJetLite or Air Canada were very sensitive to price changes.What does this suggest?
A) inelastic supply
B) inelastic demand
C) elastic supply
D) elastic demand

Question

Quizplus · Accepted Answer

Consumers who are sensitive to price changes suggest that demand for airline travel is elastic, meaning that changes in price will have a significant impact on the quantity of tickets sold. This is supported by the fact that WestJetLite's costs were too high and its revenues were too low, indicating that they were not able to attract enough price-sensitive customers to make the venture profitable.

In the Mid-1990s,WestJet Chose to Compete Head-On with Air Canada