Asked by Makaylee Wright on Jun 19, 2024
Verified
In markets entered by Southwest Airlines, gains in passenger traffic and profits
A) went primarily to airlines already in those markets.
B) were evenly distributed among airlines in those markets.
C) went almost entirely to Southwest.
D) were minimal, as the highly inelastic demand for air travel meant reduced revenues for all airlines in those markets.
Southwest Airlines
This is an American low-cost carrier known for its unique business model and customer service approach.
Passenger Traffic
The movement of passengers via modes of transportation such as air, sea, or land.
Inelastic Demand
Characterizes a situation where the quantity demanded of a good or service changes very little in response to changes in price.
- Analyze the elasticity implications for industry profits and competition.
Verified Answer
KE
kiara evansJun 24, 2024
Final Answer :
C
Explanation :
Southwest Airlines is known for its low-cost model, which often leads to significant increases in passenger traffic and profits for the airline itself when it enters new markets. This phenomenon, known as the "Southwest Effect," typically results in lower fares and increased flight options, attracting more passengers to Southwest at the expense of other airlines in those markets.
Learning Objectives
- Analyze the elasticity implications for industry profits and competition.