Economics
5th Edition
ISBN: 9781319066604
Author: Paul Krugman, Robin Wells
Publisher: Worth Publishers
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Question
Chapter 6, Problem 1BCQ
To determine
To explain:
The
Concept Introduction:
Price Elasticity of Demand: Price elasticity of demand stands for the change in the quantity demanded due to the change in the price of a good or service. If a small change in price causes a large change in quantity, then the good or service is said to be elastic. If a change in price causes little or no change in quantity, then the good or service is said to be inelastic.
Expert Solution & Answer
Explanation of Solution
- During earlier years, the airline industry, collected negligible profits. The industry applied the strategy of charging more and providing a lesser number of flights.
- This helped the airline industry to grow profits tremendously.
- The airlines in addition to charging higher prices, started charging different prices according to the time of booking and time of departure of flights.
- These factors show the price elasticity of demand for the airline industry.
Conclusion:
Thus, the demand is elastic.
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Price Elasticity of Supply; Author: Economics Online;https://www.youtube.com/watch?v=4bDIm3j-7is;License: Standard youtube license