1. From 'Thinking Critically' questions 1 and 2 from Chapter 4, page 124 of Hubbard et.al. (2022), Essentials of Economics, 5th edition.

The article implies that the demand for airline tickets is price-elastic for some travelers and price-inelastic for others. Explain why this might be so given the factors affecting the price elasticity of demand discussed in this chapter.

KEY POINTS IN THE ARTICLE The article discusses the reasons why (during normal economic conditions) airline ticketsvary so much in price between travellers for virtually the same producta seat on the same plane to the same destination. Although the article does not explicitly mention the term price elasticity of damnd, from our understanding of this chapter we know that the reason for these differences in ticket prices is due to different consumers having different price elasticities of demand. Consumers who are exible about the date they travel and have plenty of time to plan their journey have many substitutes for when they can travel. They are able to consider all the travel possibilities and choose the ones offering cheaper prices-their demand curves are elastic. The article points out that other passengers. such people travelling on business, usually have less choice about when they travelthere are few or no substitutes for a plane trip on a particular date or timeand they are, therefore, far less responsive to price. Their demand for air tickets is price-inelastic. ANALYSING THE NEWS In this chapter we have seen that the extent to which the quantity of a product demanded changes when the product's price changes depends on the price elasticity of demand. A price decrease for a product whose demand is price-elastic will lead to a greater than -- J-__..__.-I...-I. nan-I n price elasticity of demand is elastic, while reserving tickets to be sold at higher prices to those whose price elasticity of demand is inelastic. Figure 1 shows the market for air tickets where the price elasticity of demand is elastic, for example. for holiday-makers (HM). An airline will sell QHM tickets at the relatively low price of PH\