The route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines on that route is probably:

The route from Dallas to Mexico City is served by more than one airline. The demand for tickets from American Airlines on that route is probably:

• A. elastic and more elastic than the demand for all tickets for that route.
• B. inelastic and less elastic than the demand for all tickets for that route.
• C. elastic but less elastic than the demand for all tickets for that route.
• D. inelastic but more elastic than the demand for all tickets for that route.

Answer: (C)

When there are close substitutes, demand for a particular provider becomes elastic—the quantity demanded responds strongly to price changes. On a route where multiple airlines fly the Dallas to Mexico City path, travelers can switch to another carrier if American raises its fare, so the demand for American’s tickets is elastic. But the overall demand for all tickets on that route—the combined demand across all airlines—tends to be even more responsive to price changes because travelers have more ways to adjust their travel: they can choose a different airline, shift to a similar route, change dates, or even postpone travel. That makes the route-wide demand more elastic than the demand for just one airline’s tickets. So the best description is that the demand for American Airlines tickets on that route is elastic, and it is still less elastic than the demand for all tickets on that route, which aligns with the idea that the presence of many substitutes increases elasticity, but aggregating across all carriers amplifies that effect for the route as a whole.

When there are close substitutes, demand for a particular provider becomes elastic—the quantity demanded responds strongly to price changes. On a route where multiple airlines fly the Dallas to Mexico City path, travelers can switch to another carrier if American raises its fare, so the demand for American’s tickets is elastic.

But the overall demand for all tickets on that route—the combined demand across all airlines—tends to be even more responsive to price changes because travelers have more ways to adjust their travel: they can choose a different airline, shift to a similar route, change dates, or even postpone travel. That makes the route-wide demand more elastic than the demand for just one airline’s tickets.

So the best description is that the demand for American Airlines tickets on that route is elastic, and it is still less elastic than the demand for all tickets on that route, which aligns with the idea that the presence of many substitutes increases elasticity, but aggregating across all carriers amplifies that effect for the route as a whole.