Question

Airlines often charge customers who buy their ticket several weeks in advance of the flight a lower price than customers who buy their tickets a day or two before the flight. Airlines offer this lower price to customers who buy their tickets well in advance generally

A.have a smaller price elasticity of demand than customers who buy closer to the flight
B.are less likely to use their ticket.
C.have a lower marginal cost than customers who buy closer to the flight.
D.have a larger price elasticity of demand than customers who buy closer to the flight.

Answer 1

Customers who buy airline tickets well in advance generally have a larger price elasticity of demand compared to those who buy closer to the flight, as they are more sensitive to price changes and have more flexibility in their travel plans.

Step-by-step explanation:

Airlines often provide lower prices to customers who buy their tickets well in advance to ensure early bookings and reduce uncertainty. The customers who purchase tickets well in advance generally have a larger price elasticity of demand than customers who buy closer to the flight date. This is because those who plan ahead and buy early are more sensitive to changes in price and are more willing to adjust their travel plans based on cheaper fares, suggesting they respond significantly to price changes.

In contrast, customers who purchase tickets closer to the flight date likely have less flexibility in their plans and are less price sensitive, indicating a smaller price elasticity of demand. They might be traveling for business or urgent personal matters and are therefore willing to pay higher prices. As such, airlines can charge higher prices without seeing a significant drop in demand from these late purchasers.