Answer to Question #220570 in Economics for Beauty Magadlela

Question

Using the midpoint method, calculate the price elasticity for business travellers and holiday travellers if the price increases from R1 700 to R3 000. The price elasticity for

•  A. business travellers are inelastic while for holiday travellers it is elastic.
•  B. business traveller and holiday travellers are both inelastic.
•  C. business travellers and holiday travellers are both elastic.
•  D. business travellers are elastic while for holiday travellers it is inelastic.

Answer 1

To calculate the price elasticity for business travellers and holiday travellers if the price increases from R1 700 to R3 000 we need to know the number of travellers at each price.

The price elasticity for business travellers and the price elasticity for holiday travellers differ, because business travellers should have more inelastic demand.

So, the possible answer is either A or B.