Hi, I need some help with the following question Suppose vacationers and busines
ID: 1134812 • Letter: H
Question
Hi, I need some help with the following question
Suppose vacationers and business travelers have the following demand for airline tickets from X to Y:
As the price of tickets rises from $200 to $250, what is the price elasticity of demand for business travelers and vacationers?
Why might vacationers have a different elasticity than business travelers?
Quantity Demanded
(Business travelers)
Quantity Demanded
(Vacationers)
400
PriceQuantity Demanded
(Business travelers)
Quantity Demanded
(Vacationers)
$150 2,100 1,000 200 2,000 800 250 1,900 600 300 1,800400
Explanation / Answer
price elasticity of demand for business travelers
=((2000-1900)/((2000+1900)/2))/((250-200)/((200+250)/2))
=0.23
price elasticity of demand for vacationers
=((800-600)/((800+600)/2))/((250-200)/((200+250)/2))
=1.29
2)
vacationers might have a different elasticity than business travelers because vacationers can have different modes of travel while business travelers has more importance for time due to which they tend to use air travel even though prices go up.
the above is answer..
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