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Answer this question.Draw diagrams.Write explanation big paragraph 24. At a board meeting of a loss-making airline (Airflow) one of the board members has suggested raising
Answer this question.Draw diagrams.Write explanation big paragraph
24. At a board meeting of a loss-making airline (Airflow) one of the board members has suggested raising its standard fare for a flight between Glasgow and London (400 miles) from f100 to f120 to stem losses. Another board member wants to cut the standard fare, concerned that higher prices and the poor economic outlook will lead to more business and leisure passengers switching to the slower but cheaper and regular train and coach services that operate between Glasgow and London. The airline operates two flights a day to London (7.30am and 2pm) using one airplane. The morning flight typically operates at 80% capacity whilst the daytime flight operates at 50% capacity. Before deciding they have asked for your help as an economist. Using the information provided explain the importance of elasticities of demand when considering whether to raise the price of the morning flight to London. (9 marks)Step by Step Solution
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