The Short-Run Price Elasticity of Demand for Airline Travel Is

question 56

Multiple Choice

The short-run price elasticity of demand for airline travel is 0.05, while the long-run elasticity is 2.36. This means that a significant increase in airline ticket prices will cause airline companies to:

• A) collect less revenue from short-notice travelers.
• B) collect more revenue from travelers who book well in advance.
• C) lose money on short-notice travelers.
• D) collect less revenue from travelers who book well in advance.

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Definitions:

Activity Base

A measure used to allocate costs to activities, such as units produced, hours worked, or miles driven.

Service Departments

Units within an organization that support other departments but do not directly contribute to profit, such as human resources and maintenance.

Investment Turnover

A measure of a company's ability to use its assets to generate sales or revenue, indicating how efficiently the investments are being used.

Activity Base

A measure used as a basis for allocating costs in activity-based costing, relating costs to the activities that drive the need for those costs.