At the price of $100, tourists demand 237 airplane tickets. At the same price, business travelers demand 247. At the price $110, tourists demand 127 tickets and business travelers demand 127. Assuming that the demand curves of business travelers and tourists are both linear over this price range, what is the price elasticity of demand at the price $100?

Question

Quizplus · Accepted Answer

The price elasticity of demand is calculated using the formula: (percentage change in quantity demanded) / (percentage change in price). For tourists, the change in quantity is 237 - 127 = 110, and for business travelers, it is 247 - 127 = 120. The percentage change in price is (110 - 100) / 100 = 0.1. The elasticity for tourists is (110 / 237) / 0.1 = -4.64, and for business travelers, it is (120 / 247) / 0.1 = -4.86. The average elasticity is approximately -4.75.

At the Price of $100, Tourists Demand 237 Airplane Tickets