Income Elasticities. Many of the studies also
included income as an explanatory variable of air travel
demand. This will isolate the effects of a shift along
the demand curve (caused by a change in air travel
price) from the effect of a shift of the whole demand
curve (caused by a change in incomes or GDP).
The studies including the income term all produced
positive income elasticities, as would be expected
(air travel increases as incomes increase). Virtually all
of these studies estimated income elasticities above
one, generally between +1 and +2. This indicates air
travel increases at a higher rate than income growth.
This has important implications for policies seeking to
manage air travel demand by raising the price of travel.