Elasticity: Measuring Responsiveness - End of Chapter Problem Individuals differ in their willingness to pay for air travel, and airlines would like to charge different prices to different individuals based on their willingness to pay. Airlines typically attempt to divide passengers into two types: leisure travelers and business travelers. Suppose that an airline is charging $400 per ticket for all passengers on flights between New York and Washington D.C. The accompanying tables provide information on quantity demanded for air travel for leisure travelers and business travelers. Price (per ticket) $400 $500 Quantity-leisure travelers (tickets per flight) 100 50 a. What is the absolute value of price elasticity for leisure travelers if the airline increases the price to $500? Round your answer to the nearest whole number. b. What is the change in total revenue for leisure travelers when the price increases to $500? c. What is the absolute value of price elasticity for business travelers if the airline increases the price to $500? Round your answer to the hundredths place. Price (per ticket) $400 $500 $ Quantity-business travelers (tickets per flight) 100 90

Elasticity: Measuring Responsiveness - End of Chapter Problem Individuals differ in their willingness to pay for air travel, and airlines would like to charge different prices to different individuals based on their willingness to pay. Airlines typically attempt to divide passengers into two types: leisure travelers and business travelers. Suppose that an airline is charging $400 per ticket for all passengers on flights between New York and Washington D.C. The accompanying tables provide information on quantity demanded for air travel for leisure travelers and business travelers. Price (per ticket) $400 $500 Quantity-leisure travelers (tickets per flight) 100 50 a. What is the absolute value of price elasticity for leisure travelers if the airline increases the price to $500? Round your answer to the nearest whole number. b. What is the change in total revenue for leisure travelers when the price increases to $500? c. What is the absolute value of price elasticity for business travelers if the airline increases the price to $500? Round your answer to the hundredths place. Price (per ticket) $400 $500 $ Quantity-business travelers (tickets per flight) 100 90

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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