Sometimes airlines raise ticket prices as the flight departure date approaches in the hope of increasing revenue on the assumption that consumer demand is:

A) steady in its price elasticity as departure time approaches.
B) less price-elastic as departure time approaches.
C) always unit elastic.
D) very sensitive to price changes as the time of departure approaches.

Question

ANDREA RAMSEY · Accepted Answer

Final Answer : B, Explanation :  As the departure time approaches, consumers become more committed to their travel plans and may be willing to pay a higher price to secure their desired flight. This means that demand becomes less price-sensitive, or less price-elastic. Therefore, airlines can raise ticket prices without fear of losing too many customers, leading to an increase in revenue.

Definitions

Learning Objectives

Learning Objectives

Related questions