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From chapter 3, Suppose that business travelers and
vacationers have the following demand for for airline tickets from
Redding to San Francisco:
Price Quantity Demanded Quantity
Demanded
(business travelers) (vacationers)
_____________________________________
$150 2,100 tickets
1,000 tickets
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 the
price elasticity of demand for: (i) business travelers and (ii)
vacationers? (Use the midpoint method from your book)
b. In a paragraph, discuss what the results from question (a)
imply/mean.
c. Why might vacationers have different elasticity than business
travelers?
For directions regarding the format of HW # 4, please click
here.
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