By way of illustration, elasticities for different situations can be developed by selecting the relevant base elasticity and applying the relevant multipliers. For example:
To examine the impact of an EU-wide aviation tax on • short-haul markets, the elasticity would be developed as follows:
- Base multiplier: -0.6 (supra-national)
- Geographic market: 1.4 (Intra Europe)
- Short-haul adjustor: 1.1
The price elasticity would then be calculated as: -0.6 x 1.4 x 1.1 = -0.92
To examine the impact of a UK tax on aviation • on Trans Atlantic traffic, the elasticity should be developed as follows:
- Base multiplier: -0.8 (national)
- Geographic market: 1.2 (Trans Atlantic)
The price elasticity would then be calculated as: -0.8 x 1.2 = -0.96
To examine the impact of the same tax on overseas • visitors and tourism:
- Overseas resident adjustor: 1.3
The price elasticity would then be calculated as: -0.96 x 1.3 = -1.25