Question

The price elasticity of demand for business air travel is -.80 and the price elasticity of demand for leisure air travel is -1.60. Therefore, the demand for leisure air travel

Multiple Choice

• is less elastic than the demand for business travel.

• is inelastic.

• is more elastic than the demand for business travel.

• is unrelated to consumers' incomes.

Suppose when the price of coffee beans goes from $1 to $1.20 per pound, production increases from 90 million pounds of coffee beans to 110 million pounds per year. Using the mid-point method, the percentage change in quantity supplied is:

Multiple Choice

• 20 percent

• 18 percent

• 0.6

• 6.0

Answer 1

Answers:

1. is more elastic than the demand for business travel.

Because when price elasticity of demand is < -1, demand is said to be elastic and when price elasticity of demand is > -1, demand is said to be elastic. Here, -1.60 < -1 so demand for leisure air travel is elastic. And -0.80 > -1 so demand for business air travel is inelastic.

2. 20 percent

Mid-point formula od percent change in quantity= [(Q2 - Q1) / {(Q2 + Q1) ÷ 2}] x 100

= [(110 - 90) / {(110 + 90)} ÷ 2}] x 100

=[ 20 / (200 ÷ 2)] x 100

= [20 / 100 ] x 100

= 0.2 x 100

= 20 %