The proportion of total spending on an overseas visit by air will vary by country. In particular, air travel prices are likely to represent a higher proportion of travel spending in low income countries, especially where air travel markets have not been liberalised. However, for the bulk of air travel in liberalised OECD markets the air travel price typically represents around 25% of the total travel costs associated with leisure travel (though the exact percentage varies depending on the length and type of travel).4Therefore, assuming an air travel price elasticity of -1.5, a 10% increase in the cost of the air travel price will reduce demand for travel by 15% (if the demand for air travel declines by 15%, it is assumed that the demand for the whole travel package will also decline by 15%). However, a 10% increase in the air travel price represents a 2.5% increase in the total cost of travel. This implies that the price elasticity with respect to total travel costs is -6.0 (-15% / 2.5%), an extremely high elasticity and one which is not matched by the much lower elasticities estimated by previous quantitative research of tourism demand elasticities.There appears to be an inconsistency between the size of price elasticities estimated for the air transport industry and those estimated for the overall travel and tourism industry. Yet everyone in the travel and tourism industries knows they are dealing with very price sensitive customers, and that changing prices does produce a large demand response. There are two main explanations