2. (a) Suppose that business travelers and vacationers have the following demand for airline tickets. Quantity Demanded (business travelers) 2100 tickets Quantity Demanded (vacationers) 1000 tickets Price $150 200 2000 800 250 1900 600 300 1800 400 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 & interpret the results) • Why might vacationers have a different elasticity from business travelers? (b) "A good harvest will generally lower the income of farmers". Illustrate this proposition using a supply and demand diagram.

2. (a) Suppose that business travelers and vacationers have the following demand for airline tickets. Quantity Demanded (business travelers) 2100 tickets Quantity Demanded (vacationers) 1000 tickets Price $150 200 2000 800 250 1900 600 300 1800 400 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 & interpret the results) • Why might vacationers have a different elasticity from business travelers? (b) "A good harvest will generally lower the income of farmers". Illustrate this proposition using a supply and demand diagram.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose that demand schedule for discs is represented in the table below. PRICE ($) 8 10 QUANTITY DEMANDED (INCOME $10,000) 40 32 QUANTITY DEMANDED (INCOME $12,000) 50 46 If your income is $12,000, use the midpoint method to calculate your price elasticity of demand as the price of compact discs increases from $8 to $10. Select one: O a. The price elasticity of demand for discs is equal to -1.25 and demand is elastic. b. The price elasticity of demand for discs is equal to -1 and demand is inelastic. c. The price elasticity of demand for discs is equal to -0.375 and demand is inelastic. Od. The price elasticity of demand for discs is equal to -1 and demand is unit elastic.
5
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