Southwest Airlines is adding $100 million a year in new fees. Under new rules customers only get a partial refund for missed flights, prices are being raised for a third checked bag and for early boarding slots. The airline wants to increase revenue by $ 1.1billion.
A. Using the law of demand, do you predict that demand will increase, decrease or stay the same? Give your reason.
B. The demand for airline flights appears to be elastic. What may happen to total revenue if Southwest raises its prices?