econ--- about Elasticity questions ...

2007-10-11 6:15 am

Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston.

PriceQuantity Demanded(Business Travelers)Quantity Demanded(Vacationers)
$1502,1001,000
$2002,000 800
$2501,900 600
$3001,800 400

a.As the price of tickets rises from $200 to $250, what is the price elasticity of demand for I)business travelers? ii) vacationers

b.Why might vacationers have a different elasticity than business travelers?

回答 (1)

Gabriella Montez

2007-10-12 7:51 am

✔ 最佳答案

Ed = l % change in Qd / % change in price l
ai) % change in Qd = [( 1900 - 2000 ) / 2000 ] x 100% = -5%
% change in price = [( 250 - 200 ) / 200] x 100% = 25%
So Ed = l -5% / 25% l = 1 / 5
ii) % change in Qd = [( 600 - 800 ) / 800] x 100% = -25%
% change in price = 25%
So Ed = l -25% / 25% l = 1
b) Ed of vactioners is higher than that of business travelers.
It is because when price increases, the vactioners can choose not to go for travelling but it might not be possible for business travelers who aim for trade.
So the degree of necessity for airline tickets is higher in business travelers than that of vacationers. Then the Ed of business travelers tends to be more inelastic.
Hence Ed of vactioners > Ed of business travelers.

2007-10-11 23:52:22 補充：
Sorry for some typing errors: vactioners should be chnaged into vacationers.

參考: My Econ Knowledge

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