Suppose that the table below shows the daily demand amongst vacationers and commuters for train tickets from Boston to New York. As the price increases from $50 to $100, who has the higher price elasticity of demand? Why might this group's demand be more elastic?
Price of one-way ticket Quantity demanded (vacationers) Quantity demanded (commuters) $50 2,000 1,000 $100 1,500 800 $150 1,000 600
1) The vacationers. They are likely to have more flexible travel plans and therefore more elastic demand.
2) The commuters. Their lower quantity demanded translates into a more elastic demand.
3) The vacationers. A higher quantity demanded always implies a more elastic demand.
4) The commuters. They are likely to have less flexible travel plans and therefore more elastic demand.
Suppose that the table below shows the daily demand amongst vacationers and commuters for train tickets from Boston to New York. As the price increases from $50 to $100, who has the higher price elasticity of demand? Why might this group's demand be more elastic?
| Price of one-way ticket | Quantity demanded (vacationers) | Quantity demanded (commuters) |
| $50 | 2,000 | 1,000 |
| $100 | 1,500 | 800 |
| $150 | 1,000 | 600 |
1) The vacationers. They are likely to have more flexible travel plans and therefore more elastic demand.
2) The commuters. Their lower quantity demanded translates into a more elastic demand.
3) The vacationers. A higher quantity demanded always implies a more elastic demand.
4) The commuters. They are likely to have less flexible travel plans and therefore more elastic demand.
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Related questions
Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:
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?
b. Why might vacationers have a different elasticity from business travelers?
| Price | Quantity Demanded (business travelers) | Quantity Demanded (vacationers) |
|---|---|---|
| $150 | 2,100 tickets | 1,000 tickets |
| $200 | 2,000 tickets | 800 tickets |
| $250 | 1,900 tickets | 600 tickets |
| $300 | 1,800 tickets | 400 tickets |
1. What is price elasticity of demand when prices increase from $3 to $4 and quantity decrease from 90 cups to 70 cups?
2. Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:
| Price | Quantity Demanded by Business | Quantity Demanded by Vacationers |
| 150 | 2100 | 1000 |
| 200 | 2000 | 800 |
| 250 | 1900 | 600 |
| 300 | 1800 | 400 |
As the price of tickets rises from $200 To $250, what is the price elasticity of demand for a) business travelers and b) vacationers? Use the midpoint method to calculate. Why might vacationers have a diffeent elasticity from business travelers?
3. How can sellers utilize the price elasticity of demand for maximum total revenue?
