Question

n the mid-2000s, management at Singapore Airlines faced a dilemma: Should it increase fares (raise price) to boost cash flows or should it cut fares (cut price) and make it up in volume? The economist research department at Singapore provided management with an empirical estimate of price elasticity of E=1.7 over the relevant routes. Should Singapore management raise or lower fares?

1. Since demand is inelastic, so inverse relation between P and TR since the P effect dominates. Thus management should raise fares to boost revenue (cashflows).

2. Since demand is inelastic, so inverse relation between P and TR since the Q effect dominates. Thus management should lower fares to boost revenue (cashflows).

3. Since demand is elastic, so inverse relation between P and TR since the Q effect dominates. Thus management should raise fares to boost revenue (cashflows).

4. Since demand is inelastic, so inverse relation between P and TR since the Q effect dominates. Thus management should lower fares to boost revenue (cashflows).

5. Since d
8375021. demand is elastic, so inverse relation between P and TR since the Q effect dominates. Thus management should lower fares to boost revenue (cashflows).

8375022. 	a.
         	b.
         	c.
         	d.
         	e.

Answer 1