Answer to Question #219152 in Economics for Sizwe

Question

South African Airways (SAA) states that the peak holiday travel season for the airline is between April and October. If the demand for air travel is inelastic from November to March, then which of then which of the following is true?
A. Arise or drop in price will have no discernable impact on SAA's total revenue
B. A rise in price will decrease SAA's total revenue in the peak travel months.
C. A drop in price will decrease total revenue in the off peak months and increase total revenue in the peak travel months
D. A rise in price will increase SAA's total revenue in the off peak months, but will decrease total revenue in the peak travel months.

Answer 1

If the demand for air travel is inelastic from November to March, then a rise in price will increase SAA's total revenue in the off peak months, but will decrease total revenue in the peak travel months, if the demand for air travel is elastic in the peak month.

So, the correct answer is D.