Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter7: Consumer Choice And Elasticity
Section: Chapter Questions
Problem 13CQ: Suppose Erin, the owner-manager of a local hotel projects the following demand for her rooms: a....
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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

 

 

 

 

 

 

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.)

 Why might vacationers have a different elasticity from business travelers?

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

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