Suppose that business travelers and vacationers have the following demand for airline tickets...
Question:
Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:
| Price | Quantity Demanded (business travelers) | Quantity Demanded (vacationers) |
|---|---|---|
| $150 | 2,100tickets | 1,000tickets |
| 200 | 2,000 | 800 |
| 250 | 1,900 | 600 |
| 300 | 1,800 | 400 |
a. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations.)
b. Why might vacationers have a different elasticity from business travelers?
Price Elasticity of Demand:
The price elasticity of demand measures how sensitive consumers are to price changes of a certain good. The higher the value in absolute terms (PED is always negative), the more sensitive consumers are.
Answer and Explanation: 1
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The price elasticity of demand for business travelers using the midpoint method is...
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Chapter 3 / Lesson 54Learn what price elasticity is. Discover how to find price elasticity of demand, study examples of price elasticity, and examine a price elasticity graph.
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