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Q. If a passenger leaves for business travels by air, he or she will be reimbursed...

Q. If a passenger leaves for business travels by air, he or she will be reimbursed by the company, but the traveler will bear the travel expenses himself. Explain what this means about the price elasticity of demand for air travel.
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Answer #1

In case of business traveller the expense will be borne by the company and the price will not affect the buying decision for the business traveller. Because they will be travelling only at that time when it is urgent or they have to attend some meeting that they cannot avoid. So, they will be ready to pay any price. Therefore, for them it will be less elastic.

On other hand when the expense has to be borne by the traveller then the traveller will be more conscious and will be looking for alternatives. Hence, for travellers the elasticity of demand would be high.

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