Question

Uppose that at a price of $200, 190 tickets are demanded to fly from Ithaca, New York, to Los Angeles, California. Now the price rises to $400, and 160 tickets are demanded. Assuming the demand for tickets is linear, find the price elasticities at the quantity-price pairs (190, 200) and (160, 400).

Answer 1

The price elasticity of demand for the given quantity-price pairs can be calculated using the formula: Price Elasticity of Demand = % change in quantity demanded / % change in price.

Step-by-step explanation:

The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. It is calculated using the formula:

Price Elasticity of Demand = % change in quantity demanded / % change in price

For the quantity-price pair (190, 200), the % change in quantity demanded is calculated as (160 - 190) / 190 = -0.1579, and the % change in price is calculated as (400 - 200) / 200 = 1. The price elasticity of demand is calculated as -0.1579 / 1 = -0.1579.

For the quantity-price pair (160, 400), the % change in quantity demanded is calculated as (190 - 160) / 160 = 0.1875, and the % change in price is calculated as (200 - 400) / 400 = -0.5. The price elasticity of demand is calculated as 0.1875 / -0.5 = -0.375.