What Has a Greater Price Elasticity of Demand Travel in Economy Class or Business Class?

By Michael Ferguson

The travel industry has seen a major shift in recent years, with more and more people opting for economy class over business class. This is largely due to the fact that economy class offers better value for money, as it is often cheaper than business class. The question remains however, as to whether or not the price elasticity of demand is higher for economy or business class travel.

In order to answer this question, we must first understand what price elasticity of demand is. Price elasticity of demand refers to the degree by which a change in the price of a good or service affects the quantity demanded.

It is measured by calculating the percentage change in the quantity demanded divided by the percentage change in price. If a product’s price elasticity of demand is greater than one, then it means that its demand will increase when its price decreases and vice versa.

When it comes to economy versus business class travel, it appears that economy generally has a higher price elasticity of demand than business class does. This can be attributed to several factors such as the affordability gap between economy and business class tickets, as well as the convenience factor associated with flying in economy compared to flying in business. Additionally, many airlines have begun offering budget-friendly fares for their economy tickets which further contributes to its higher price elasticity of demand compared to business class travel.

The higher price elasticity of demand for economy travel also implies that consumers are more likely to opt for an affordable option when booking flights, which has proved beneficial for airlines as they can generate more revenue from budget-conscious travellers who are willing to sacrifice comfort and other amenities associated with flying in business class.

Conclusion: In conclusion, it appears that economy travel has a higher price elasticity of demand compared to business class travel due to its affordability gap and convenience factor associated with flying in economy versus flying in business. This has resulted in airlines being able to generate more revenue from budget-conscious travellers who are willing to sacrifice comfort and other amenities associated with flying in business class.