Problem 2 People differ in their willingness to pay for air travel and airlines would like to charge different prices to different people. 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 Leisure travelers $400 $500 Price (dollars per ticket) Quantity of tickets per flight 100 50 Business travelers Quantity of tickets per flight 100 90 17. Using the midpoint method, calculate and describe the price elasticity of demand for both types of passengers if the airline increases prices to $500. Calculate the change in total revenue for each group.

Problem 2 People differ in their willingness to pay for air travel and airlines would like to charge different prices to different people. 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 Leisure travelers $400 $500 Price (dollars per ticket) Quantity of tickets per flight 100 50 Business travelers Quantity of tickets per flight 100 90 17. Using the midpoint method, calculate and describe the price elasticity of demand for both types of passengers if the airline increases prices to $500. Calculate the change in total revenue for each group.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 2P

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