I. Rank the following (please provide a brief explanation as well) from the most to least elastic.
3. European vacation
5. Honda Accord
6. Dijon mustard
II. Suppose that business travelers and vacationers have the following demand for airline tickets from New York to Boston:
Price Qty. Demanded (business travelers) Qty. Demanded (vacationers)
$150 2,100 1,000
200 2,000 800
250 1,900 600
300 1,800 400
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 arc elasticity method in your calculations.)
b. Why might vacationers have a different elasticity than business travelers?
This job examines elasticity for vacationers.