A market research has revealed that the price elasticity of demand for airline tickets for business travelers is ER = -1.15. while for leisure travelers it is eL = -1.52 .A profit-maximizing air company considers using third-degree price discrimination, charging a price PR for business travelers and price P for leisure travelers. The airline faces the same marginal cost MC for both types of travelers. Use the inverse price elasticity rule to determine the ratio of business to leisure prices PB/ P: O (a) 0.29 O (b) 2.63 O (c) 1 O (d) 4.25

A market research has revealed that the price elasticity of demand for airline tickets for business travelers is ER = -1.15. while for leisure travelers it is eL = -1.52 .A profit-maximizing air company considers using third-degree price discrimination, charging a price PR for business travelers and price P for leisure travelers. The airline faces the same marginal cost MC for both types of travelers. Use the inverse price elasticity rule to determine the ratio of business to leisure prices PB/ P: O (a) 0.29 O (b) 2.63 O (c) 1 O (d) 4.25

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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