Answer to Question #221123 in Economics for peach

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 during the peak period and it is elastic from November to March, then which of the following is true?

• A. A drop in price will decrease total revenue in the off-peak months and increase total revenue in the peak travel months.
• B. A rise in price will decrease SAA’s total revenue in the off-peak months, but will increase total revenue in the peak travel months.
• C. 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.
• D. A rise or drop in price will have no discernible impact on SAA’s total revenue.

Answer 1

If the demand for air travel is inelastic during the peak period and it is elastic from November to March, then a rise in price will decrease SAA’s total revenue in the off-peak months, but will increase total revenue in the peak travel months.

So, the correct answer is B.