Answer to Question #236344 in Economics for DaRa

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

Answer 1

We additionally need to know the change in quantity demanded to calculate the price elasticity for business travellers and holiday travellers if the price increases from R1 700 to R3 000.

The reason for the difference between the price elasticity for business travellers and the price elasticity for holiday travellers is that for business travellers travelling between Johannesburg and Cape Town, airline tickets are more of a necessity than for holiday travellers.

So, the correct answer is B.