What does the following statement imply about price elasticity of demand? "Airlines experiencing higher traffic with reduced fares,but are struggling with fall in revenue."
A)demand for airline travel is price inelastic
B)elasticity of demand for airline travel is equal to one
C)elasticity of demand for airline travel is constant
D)elasticity of demand for airline travel is equal to zero
E)demand for airline travel is price elastic

Question

Quizplus · Accepted Answer

The statement implies that airlines have reduced their fares and as a result, have experienced higher traffic. However, they are still struggling with a fall in revenue, indicating that the increase in demand due to lower prices is not sufficient to make up for the loss in revenue per customer. This suggests that demand for airline travel is price elastic, meaning that a change in price has a proportionately larger impact on the quantity demanded.

What Does the Following Statement Imply About Price Elasticity of Demand