BA Questions
Posted by bjyechan7 on November 5, 2009
a) British Airways believes that European air travel is price inelastic in demand at the upper segment of the market. Therefore, increasing prices will not affect the quantity demanded and revenue much. Ryanair believes that European air travel is price elastic in demand at the lower segment of the market. Therefore, lowering prices will increase quantity demanded and revenue.
b) Profit is total revenue minus total costs. Two ways to increase profit is by lowering costs or increasing revenue. A way to lower costs is to lower the amount of flight attendants and a way to higher revenue is to expand on routes.
c) Their first seats are more expensive and as time goes by, they lower the price, but makes sure it still gives them a profit. The price will above the cost of carrying that extra passenger, so it will give them a profit and the price could be very low.
