1. What factors determine the demand for air transport in the UK? (40 marks)
2. Explain the concept of Income Elasticity of Demand and distinguish between:
a. normal goods
b. inferior goods
Identify the implications for (a) budget and (b) scheduled passenger airlines during a recession?
(20 marks)
3. In January 2015, an article in the Guardian explained:
“Why air passengers shouldn’t bank on cheaper air fares after a drop in the price of oil.”
Using your knowledge of the concept of price elasticity of demand, explain the reasons why cheaper air tickets may not lead to higher passenger numbers and increased revenue.
(40 marks)
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