Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 16, Problem 16.3.12PA
To determine
Application of two-part tariff pricing.
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Suppose that the market for air travel between Chicago and Dallas isserved by just airlines, United and American. An economist has studied thismarket and has estimated that the demand curves for round-trip tickets foreach airline are as follows:QdU = 10,000 - 100PU + 99PA (United’s demand)QdA = 10,000 - 100PA + 99PU (American’s demand) where PU is the pricecharged by United, and PA is the price charged by American.a. Suppose that both American and United charge a price of $300 each for around-trip ticket between Chicago and Dallas. What is the price elasticityof demand for United flights between Chicago and Dallas?b. What is the market-level price elasticity of demand for air travel betweenChicago and Dallas when both airlines charge a price of $300? (Hint:Because United and American are the only two airlines serving theChicago–Dallas market, what is the equation for the total demand for airtravel between Chicago and Dallas, assuming that the airlines charge thesame price?)
Suppose you are trying to determine the pricing for popcorn at a movie theater. There are just two types of customers (for simplicity assume just two total customers). One customer has a low demand for popcorn and will pay $1.00 for 16 oz of popcorn and nothing for a second 16oz. The high demand customer will pay $1.25 for the first 16oz and $0.50 for the second 16oz.
If you charge one price for every 16oz a customer buys, what would you charge?
At the start of 2010, the UK was hit by extremely cold weather including snow and ice. As a result, there was a major increase in demand for salt to put on the roads to make them safer. However, the supply of salt in the UK comes mainly from three salt mines; one in Cheshire, one in Cleveland, and one in County Antrim. The shortage was so great that at one point the government ordered councils to use less grit on the roads and stopped gritting the hard shoulder of the motorways. Problems in the past meant councils had been instructed to hold a few days worth of stock of salt but this was not enough to make the roads safe in what was the coldest period since 1963.
Questions
Sketch a supply curve that represents the supply of salt in the short run. Explain your diagram.
Why do councils keep stocks of salt?
Add to your first diagram a long-run supply curve for salt; explain your diagram.
Chapter 16 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 16 - Prob. 16.1.1RQCh. 16 - Prob. 16.1.2RQCh. 16 - Prob. 16.1.3PACh. 16 - Prob. 16.1.4PACh. 16 - Prob. 16.1.5PACh. 16 - Prob. 16.1.6PACh. 16 - Prob. 16.2.1RQCh. 16 - Prob. 16.2.2RQCh. 16 - Prob. 16.2.3RQCh. 16 - Prob. 16.2.4PA
Ch. 16 - Prob. 16.2.5PACh. 16 - Prob. 16.2.6PACh. 16 - Prob. 16.2.7PACh. 16 - Prob. 16.2.8PACh. 16 - Prob. 16.2.9PACh. 16 - Prob. 16.2.10PACh. 16 - Prob. 16.2.11PACh. 16 - Prob. 16.2.12PACh. 16 - Prob. 16.2.13PACh. 16 - Prob. 16.2.14PACh. 16 - Prob. 16.2.15PACh. 16 - Prob. 16.3.1RQCh. 16 - Prob. 16.3.2RQCh. 16 - Prob. 16.3.3RQCh. 16 - Prob. 16.3.4PACh. 16 - Prob. 16.3.5PACh. 16 - Prob. 16.3.6PACh. 16 - Prob. 16.3.7PACh. 16 - Prob. 16.3.8PACh. 16 - Prob. 16.3.9PACh. 16 - Prob. 16.3.10PACh. 16 - Prob. 16.3.11PACh. 16 - Prob. 16.3.12PACh. 16 - Prob. 16.2CTECh. 16 - Prob. 16.3CTE
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