2. (a) Suppose that business travelers and vacationers have the following demand for airline tickets. Price Quantity Demanded (business travelers) Quantity Demanded (vacationers) 1000 tickets $150 2100 tickets 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. Price Quantity Demanded (business travelers) Quantity Demanded (vacationers) 1000 tickets $150 2100 tickets 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.
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