, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations.) b.    Why might vacationers have a different elasticity from business travelers? c.    What would

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Problem 2. Suppose that business travelers and vacationers have the following demand for airline tickets from Karachi to Dubai:

 

Price 

Quantity Demanded

(Business Travelers)

Quantity Demanded

(vacationers)

$150

2100 Tickets

1000 Tickets

$200

2000

 800

$250

$300

1900

1800

 600

 400

 

a.   As the price of tickets rises from $150 to $200, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint method in your calculations.)

b.    Why might vacationers have a different elasticity from business travelers?

c.    What would you recommend based on the above information for airline to increase the revenue?

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