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Chapter 5 Text Exam Questions and answers

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Chapter 5 Text Exam Questions and answers 2. Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston: - Price: Qty Dem (Biz) Qty Dem (Vac) As the price of tickets rises from $200 to $250, what is the price elasticity of demand for (i) business travelers and (ii) vacationers? (Use the midpoint formula in your calculations.) - i) Price elasticity for business travellers = (Q2-Q1)/[(Q2+Q1)/2]/(P2-P1)/[(P2+P1)/2] = [()/1950]/[(250-200)/225] = -0.23 Therefore, elasticity = |-0.23| = 0.23

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