(a)
- State the equation used to calculate income elasticity of demand. [2]
- What conclusion can be drawn about air travel from Fig. 1? [2]
(b)
Using Fig. 2, explain a likely reason for the different price elasticity values for
- business flights in comparison with leisure flights [3]
- long-distance flights in comparison with short-distance flights. [3]
(c)[4]
Explain the importance of the price elasticity values in Fig. 2 for an airline that is thinking about a fare-cutting policy.
(d)[6]
Discuss the costs and benefits of higher demand for air travel.