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

question 52

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

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Definitions:

Dominant Strategy

In game theory, a strategy that is best for a player regardless of what strategies other players choose.

Prisoners' Dilemma

A concept in game theory where two individuals acting in their own self-interest do not produce the optimal outcome.

Tacit Collusion

A form of collusion in which businesses subtly coordinate actions without explicit agreement, aiming to raise prices or stabilize market conditions.

Legal

Pertains to matters governed by law, statutes, or regulations and recognized or enforced by a judicial system.