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Suppose that business travelers and vacationers have the following demand for airline tickets

Price Qty. Demanded (business travelers) Qty. Demanded (vacationers)

price Tickets Demanded (business travelers) Tickets Demanded (Vacation travelers)
150 2100 1000
200 2000 800
250 1900 600
300 1800 400

1A. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for Business Travelers. Is demand elastic or inelastic? Show your work

Illustrate the demand curves on the graph.

1B. As the price of tickets rises from $200 to $250, what is the price elasticity of demand for Vacationers. Is demand elastic or inelastic? Show your work!

1C. Why might vacationers have a different elasticity than business travelers?

Suppose that your demand schedule for compact disks is as follows:

price quantity of demanded if income = 10,000 quantity of demanded if income = 12,000
8 40 50
10 32 40
12 24 30
14 16 20
16 8 12

2A. What is the numerical income elasticity of demand as your income increases from $10,000 to $12,000 if the price of the CDs is $12*. Is this product a normal good or an inferior good based on your calculation? Show your work!

2B. What is the numerical income elasticity of demand as your income increases from $10,000 to $12,000 if the price of the CDs is $16*. Is this product a normal good or an inferior good based on your calculation? Show your work!

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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Related questions

Consider the following demand schedule for movie tickets


Price Quantity Demanded (Ticket per day)

9 100

8 200

7 300


Suppose the price of a movie ticket falls from $9 to $7.

a. Calculate the price elasticity of demand for movie tickets:

b. Is demand for movie tickets elastic or inelastic?

c. What is the change in the total revenue from the sale of movie

tickets

1. Using supply-and-demand diagrams, show the effect of the following events on the market for sweatshirts.

(a) A hurricane in South Carolina damages the cotton crop.

(b) The price of leather jackets falls.

(c) All colleges require morning exercise inappropriate attire

(d) New knitting machines are invented.

 

2. (a) What is the definition of quantity demanded?

(b) What is the definition of quantity supplied?

(c) List the 5 factors that cause the demand curve to shift to the left or the right.

(d) Choose one of the factors from part (b) and consider the market for bananas. On a well-labeled diagram, demonstrate what will occur in this market if there is a change in this factor.

(e) List the 4 factors that cause the supply curve to shift to the left or the right.

(f) Choose one of the factors from part (e) and consider the market for scooters. On a well-labeled diagram, demonstrate what will occur in this market if there is a change in this factor.

(g) Choose one factor from part (b) and another from part (e) and consider the market for minivans. On a well-labeled diagram, demonstrate what will occur in this market given the change in both factors. (Hint: Draw separate diagrams for parts (d), (f), & (g))

3. Suppose that the price of basketball tickets at your college is determined by market forces. Currently, the demand and supply schedules are as follows:

page1image3877024

(a) Draw the demand and the supply curves. What is unusual about this supply curve? Why might this be true?

(b) What are the equilibrium price and quantity of tickets?

(c) Your college plans to increase total enrollment next year by 5,000 students. The additional students will have the following demand schedule:

page1image3870304

Now add the old demand schedule and the demand schedule for the new students to calculate the new demand schedule for the entire college. What will be the new equilibrium price and quantity?

 

 

4. Market research has revealed the following information about the market for chocolate bars: The demand schedule can be represented by the equation QD = 1600 − 300P, where QD is the quantity demanded and P is the price. The supply schedule can be represented by the equation QS = 1400 + 700P, where QS is the quantity supplied.

(a) Sketch a graph representing the market for chocolate bars. Identify the equilibrium point on your graph.

(b) Calculate the equilibrium price and quantity in the market for chocolate bars.

 

5. For each of the following pairs of goods, which good would you expect to have more elastic demand and why?

(a) Required textbooks or mystery novels

(b) Beethoven recordings or classical music recordings in general

(c) Subway rides during the next six months or subway rides during the next five years

(d) Root beer or water

(e) Insulin or Tylenol

(f) Food or bananas

 

6.Consider the following information from the market for lemonade:

Price Quantity Demanded Quantity Supplied
$1 500 cups 150 cups
$2 200 cups 310 cups

(a)  As the price changes from $1 to $2, what is the value of price elasticity of demand?

(b)  As the price changes from $1 to $2, what is the value of price elasticity of supply?

(c)  Sketch a diagram demonstrating the market for lemonade. Are the supply and demand curves relatively inelastic or elastic? Explain.

(d)  Suppose that when the price of lemonade increases from $1 to $2, the quantity demanded of orange juice increases from 150 cups to 190 cups. Calculate cross-price elasticity of demand for orange juice.

(e)  Are orange juice and lemonade substitute or complementary goods? Explain.

 

7. Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:

page2image1834528

(a)  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 method in your calculations)

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

 

8. Suppose the price elasticity of demand for heating oil is 0.2 in the short run and 0.7 in the long run.

(a)  If the price of heating oil rises from $1.80 to $2.20 per gallon, what happens to the quantity of heating oil demand in the short run? In the long run? (Use the midpoint method in your calculations)

(b)  Why might this elasticity depend on the time horizon?


9. The Government has decided that the free-market price of cheese is too low.

(a) Suppose the government imposes a binding price floor in the cheese market. Draw a supply-and-demand diagram to show the effect of this policy on the price of cheese and the quantity of cheese sold. Is there a shortage or surplus of cheese?

(b) Farmers complain that the price foor has reduced their total revenue. Is this possible? Explain

(c) In response to farmer's complaints, the government agrees to purchase all the surplus cheese at the price floor. Compared to the basic price floor, who benefits from this new policy? Who loses?

a. If a 10 percent increase in price decreases the quantity demanded by 12 percent, the price elasticity of demand is ____________.

b. The price of strawberries falls from $1.50 to $1.00 per carton and the quantity demanded goes from 100,000 to 200,000 cartons. Calculate the price elasticity of demand and interpret it in words.

c. At the present level of consumption, 4,000 movie tickets, and at the current price, $5 per ticket, the price elasticity of demand for movie tickets is 1. Calculate the percentage by which the owners of movie theaters must reduce the price in order to sell 5,000 tickets.

d. The price elasticity of demand for ice-cream sandwiches is 1.2 at the current price of $0.50 per sandwich and the current consumption level of 100,000 sandwiches. Calculate the change in the quantity demanded when the price rises by $0.05.

e. Calculate the price elasticity of supply for web-design services when the price per hour rises from $100 to $150 and the number of hours transacted increases from 300,000 to 500,000. Is supply elastic, inelastic, or unit elastic?

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