Airlines That Try to Lower Fares in Order to Increase

question 54

Multiple Choice

Airlines that try to lower fares in order to increase revenue must believe that the demand for airline service is

• A)price inelastic.
• B)income elastic.
• C)income inelastic.
• D)price elastic.
• E)cross-price elastic.

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Definitions:

Net Present Value

A financial metric used to evaluate the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Monthly Interest Rate

The interest rate applied to a loan or investment for one month, often derived from an annual interest rate.

Variable Cost

Costs that vary directly with the level of production or activity within a business.

Sales Price

Sales price refers to the final amount of money a buyer pays to purchase a product or service.