Question 2 (b)(ii)
Why holiday travellers and business travellers respond differently to fares
2 marks
- Time to write
- About 4 minutes
Question
Question 2 (b)(ii) · 2 marksAssume that business travellers and vacationers face the following demand for airline tickets from Delhi to Jaipur:
| Price | Business Quantity demand - Number of Tickets | Vacationers Quantity demand - No. of Tickets |
|---|---|---|
| 180 | 3150 tickets | 1500 tickets |
| 240 | 3000 | 1200 |
| 300 | 2850 | 900 |
| 360 | 2700 | 600 |
- Why might vacationers have a different elasticity than business travellers?
Reworded from the university paper; the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- Assume that business travellers and vacationers…The paper fixes this: use it as given, and say so in your answer.
What the paper leaves open
The stem and table are printed before item (i) and are repeated here; item (ii) is printed on the next page.
Write it in this order
- 1 What the table shows about the two elasticities ½ mark 1 min
- 2 Reasons for the difference: postponement, substitutes, share of own budget 1½ marks 3 min
Try it first. About 4 minutes for 2 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
What the table shows. When the fare rises from 180 to 240 (a rise of one-third), business tickets fall from 3150 to 3000, about 4.8 per cent, while vacationers' tickets fall from 1500 to 1200, a full 20 per cent. Vacationers respond far more to price: their demand is more elastic, and business demand is relatively inelastic.
- Can the trip wait? A business trip to a client meeting in Jaipur usually has to happen on a fixed date, so it is close to a necessity for the traveller. A holiday can be put off, shortened or dropped. Demand for what can be postponed is elastic; demand for what cannot is inelastic.
- Are there substitutes? A family going on holiday can choose another destination, or go to Jaipur by train, bus or car, which take longer but cost less. A business traveller short of time has fewer close substitutes for the flight. The more substitutes a buyer has, the more elastic her demand.
- Whose money is it? Where an employer meets the fare, the rise takes little from the traveller's own budget; a vacationer pays out of household income, where the fare is a large item. A good that takes a larger share of the buyer's budget tends to have more elastic demand.
Conclusion. Because holidays can be postponed, have many substitutes and are paid for from the traveller's own pocket, vacationers' demand for tickets is more elastic than that of business travellers.
Where the 2 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | What the table shows about the two elasticities | 0.5 |
| 2 | Reasons for the difference: postponement, substitutes, share of own budget | 1.5 |
| Total | 2 |
Report a problemopens an email to admin@getkunji.com with the question ID2555-Q2biialready filled in.