Determinants of Price Inelasticity in Airline Demand

Steps:

• Price inelasticity means quantity demanded changes little with price, driven by few substitutes, necessity, and small budget share.
• Long-distance flights limit substitutes (e.g., impractical driving), reducing elasticity.
• Business purpose treats flights as essential and time-sensitive, further inelastic.
• Low income makes essential travel a smaller budget proportion, reinforcing inelasticity.

Why A is correct:

• It maximizes inelasticity by combining few substitutes (long distance), necessity (business), and low budget impact (low income), per elasticity theory.

Why the others are wrong:

• B: Short distance adds substitutes like driving, increasing elasticity.
• C: Leisure purpose allows delays or alternatives, heightening elasticity.
• D: High income for leisure amplifies elasticity as non-essential spending rises with price.

Final answer: A