Business, 11.04.2020 00:10 mareiashanti002

Uppose that an airline is charging $400 per ticket for all passengers on flights between New York and Washington D. C. The accompanying tables provide information on quantity demanded for air travel for leisure travelers and business travelers.
Price Quantity‑leisure travelers
(per ticket) (tickets per flight)
$400 100
$500 50

Price Quantity‑business travelers
(per ticket) (tickets per flight)
$400 100
$500 90

a. What is the absolute value of price elasticity for leisure travelers if the airline increases the price to $500? Round your answer to the nearest whole number.

b. What is the change in total revenue for leisure travelers when the price increases to $500?

c. What is the absolute value of price elasticity for business travelers if the airline increases the price to $500? Round your answer to the hundredths place.

d. What is the change in total revenue for business travelers when the price increases to $500?

e. To maximize total revenue, the airline should charge
1. $400 to leisure travelers and $500 to business travelers.
2. $500 to both groups.
3. $400 to both groups.
4. $500 to leisure travelers and $400 to business travelers.

Answers: 2

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