Question

Why is price elasticity of demand negative for the airline industry but positive for income?

Why is price elasticity of demand negative for the airline industry but positive for income?

Homework Answers

Answer #1

When there is an increase in the price of airline tickets then the quantity demanded will fall. So, there exists an inverse relationship between the price and quantity demanded of airline tickets. Therefore, the price elasticity of demand is negative.

When there is an increase in income of consumers then the demand of airline tickets will increase. So, there exists a direct relationship between the price and quantity demanded. Therefore, the income elasticity of demand is positive.

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