At the price of 100, tourists demand 587 airplane tickets. At the same price, bu
ID: 1101139 • Letter: A
Question
At the price of 100, tourists demand 587 airplane tickets. At the same price, business travelers demand 527. At the price 120, tourists demand 127 tickets and business travelers demand 127. Assuming that the demand curves of business travelers and tourists are both linear over this price range, what is the price elasticity of demand at the price 100?
(a) - 3.86
(b) - 43
(c) - 4.63
(d) - 0.04
(e) None of the above.
(Please show work or explain. i already have the answer. just need to know how to solve it)
Explanation / Answer
Initial Price(P1) = 100
Final Price(P2) = 120
Initial Demand(D1) = 587+527 = 1114
Final Demand(D2) = 127 + 127 = 254
elasticity = {(D2-D1)/D1}/{(P2-P1)/P1} = (-430/557)/(1/5) = -3.86
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