Calculate estimate of price elasticity of demand for economy

Reference no: EM13182352

As a national manager for United Airlines you have recently undertaken a survey of the number of passengers per flight on the Boston-New Orleans route that you service. The survey was conducted over five successive months. The data collected included the round-trip fare for an economy-class flight, the average annual per capita income of people who fly the Boston-New Orleans route, and the average passengers per flight on both United and US Air. Assume that all other factors (the price charged by other airlines, the size of planes flown, etc) have remained constant." Month United Price US Air Price Income United Load US Air Load 1 $440 $448 $40,000 130 60 2 $440 $448 $42,000 140 66 3 $436 $444 $38,000 140 61 4 $432 $440 $38,000 136 59 5 $436 $440 $38,000 134 63 a. On the Boston-New Orleans route, calculate an estimate of the price elasticity of demand for United economy seats. Show your work and explain. b. For the same route determine the income elasticity of demand for United economy seats. Show your work and explain. c. Also calculate an estimate of the cross-price elasticity of United flights with respect to US Air flights on the route. Show your work and explain. d. Based on your price elasticity estimate, would United obtain higher total revenue by lowering its price? Explain. e. Based on your elasticity estimates, are United and US Air flights substitutes or complements? Explain. f. Are United's economy seats a normal or inferior good? Explain. g. If consumers had been given more time to adjust to price changes, would you expect the price elasticity of demand to be more inelastic or more elastic? Explain. h. Consider the price elasticity of demand for the category flights on all airlines between Phoenix and Boston. Would that price elasticity be more?

Reference no: EM13182352

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