Calculate the price elasticity of demand for the following airline routes. On the Burbank to Oakland route airfare is initially set at $86.50 and 246,555 passengers per year. Price is lowered to $44.69 during the next year and passenger flights increase to 1,053,139. What is the point price elasticity of demand on this route at the initial price?
Is this elastic or inelastic demand? What does this result mean for total revenue? On the Kansas City to St Louis route airfare is initially set at $154.42 and 428,711 passengers travel per year. Price is lowered to 45.82 during the next year and passenger flights increase to 722,425. What is the arc price elasticity of demand on this route? Is this elastic or inelastic demand? What does this result mean for total revenue?