Ask Question
BusinessBusiness
22 November, 07:55

Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should A. decrease the price charged to vacationers and increase the price charged to business travelers. B. decrease the price to both groups of customers. C. increase the price charged to vacationers and decrease the price charged to business travelers. D. increase the price for both groups of customers.

+4
Answers (1)
  1. 22 November, 11:35
    0
    Answer: If the airline's objective is to increase total revenue, it should decrease the price charged to vacationers and increase the price charged to business travelers.

    Explanation:

    Here the objective of the airline is to increase total revenue, therefore airline should practice price discrimination i. e. charge different prices to vacation travelers and business travelers.

    Since customers traveling for vacations have elastic demand i. e. ε > 1, so if airline reduces the price of air ticket for them, then there will be a percentage decrease in the price that will be less then the percentage increase in the number of vacation travelers.

    Therefore, total revenue will increase with decreasing price charged to vacationers.

    Whereas;

    The demand of business travelers is inelastic i. e. ε < 1, so if airline increases the price of air ticket for business travelers, then there will be a percentage increase in the price that will be more then the percentage decrease in the number of vacation travelers

    Therefore, total revenue will increase with increasing price charged to business travelers.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers
You Might be Interested in
On January 1, 2021, G Corp. granted stock options to key employees for the purchase of 82,000 shares of the company's common stock at $26 per share. The options are intended to compensate employees for the next two years.
Answers (1)
Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000. After the liquidation expenses of $12,000 had been paid and the noncash assets sold, Creighton had a deficit of $8,000.
Answers (1)
Employees in your company are not complying with the rules regarding clocking in and clocking out each day. The rules in this situation are very important as employees will not receive their correct pay if the clocking procedures are not followed.
Answers (1)
A gift that might otherwise be viewed as a future interest in a trust can be treated as a present interest gift if:
Answers (1)
Melanie needs to ensure that readers are able to locate specific sections within a document easily. What should she include in the document? concordance index table of contents bibliography
Answers (2)
New Questions in Business
Briefly describe how people's success and self confidence are related.
Answers (2)
The United States practices "sugar protectionism" by A. banning sugar imports. B. charging sugar exporters a flat license fee to be able to export sugar in the United States. C.
Answers (2)
You should not pursue a career in an industry that has experienced even a small decline in employment growth. True False
Answers (1)
Header Motor, Inc., paid a $3.91 dividend last year. At a constant growth rate of 7 percent, what is the value of the common stock if the investors require a 16 percent rate of return? The value of the common stock is $ nothing.
Answers (1)
Beerbo Corporation purchased Mitter Lite Company three years ago. As a result of the acquisition, Beerbo recorded goodwill of $400,000 at that time and created the Mitter Lite Division (MLD).
Answers (1)
Home » Business » Suppose an airline determines that its customers traveling for business have inelastic demand and its customers traveling for vacations have an elastic demand. If the airline's objective is to increase total revenue, it should A.
Sign Up Forgot Password?