Answer to Question #217342 in Economics for Paballo

Question

This question is based on the following information which indicates the demand for airline tickets between Johannesburg and Cape Town for business travellers and holiday travellers.

Using the midpoint method, calculate the price elasticity for business travellers and holiday travellers if the price increases from R1 700 to R3 000. Which one of the following might be the reason for the difference between the price elasticity for business travellers and the price elasticity for holiday travellers?

•  A. It is easier for business travellers to change their plans than for holiday travellers
•  B. For business travellers travelling between Johannesburg and Cape Town, airline tickets are more of a necessity than for holiday travellers.
•  C. Fewer substitutes are available for holiday travellers than for business travellers.
•  D. It is easier for holiday travellers to deal with COVID-19 regulations.

Reset Selection

Answer 1

the price elasticity:

$\frac{3000-1700}{(3000+1700)/2}=0.55$

B. For business travellers travelling between Johannesburg and Cape Town, airline tickets are more of a necessity than for holiday travellers.