A recent study shows, that when airfares within the continental US increase by 10%, the quantity demanded for Greyhound rides increases by 5%. a. What is the cross price elasticity between flights and bus rides? Based on the cross elasticity calculated what can be said about the relationship between these two goods? Why? b. The same study shows that this increase in airfares causes the quantity demanded for luxury luggage to decrease by 15%. What is the cross price elasticity between flights and luggage? Based on the cross elasticity calculated what can be said about the relationship between these two goods? Why?
A recent study shows, that when airfares within the continental US increase by 10%, the quantity demanded for Greyhound rides increases by 5%. a. What is the cross price elasticity between flights and bus rides? Based on the cross elasticity calculated what can be said about the relationship between these two goods? Why? b. The same study shows that this increase in airfares causes the quantity demanded for luxury luggage to decrease by 15%. What is the cross price elasticity between flights and luggage? Based on the cross elasticity calculated what can be said about the relationship between these two goods? Why?
Chapter5: Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 4.9P: (Other Elasticity Measures) Complete each of the following sentences: a. The income elasticity of...
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A recent study shows, that when airfares within the continental US increase by 10%, the quantity demanded for Greyhound rides increases by 5%.
a. What is the cross price elasticity between flights and bus rides? Based on the cross elasticity calculated what can be said about the relationship between these two goods? Why?
b. The same study shows that this increase in airfares causes the quantity demanded for luxury luggage to decrease by 15%. What is the cross price elasticity between flights and luggage? Based on the cross elasticity calculated what can be said about the relationship between these two goods? Why?
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