Question

Airline passengers are broadly segmented by purpose of travel. Characterize the two major segments by price elasticity of demand. Use price elasticity of demand to explain how prices are set for each segment.

Answer 1

Airline passenger are basically clasiffied as business travellrs or economy travellers,

so the elasticity of demand is basically higher for economy travellers because with higher prices they strat finding alternatives like railways etc,

business travellers on the other hand are basically not much affected by the prices because this facility is mostly used by the high end customers whom are not much affected by highe prices, the sort after category of rich people.

so prices are thu generally high for business travels compared to the lower prices set for economy travels.