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{"ops":[{"attributes":{"bold":true},"insert":"Question five: Suppose that business travelers and vacationers have the following demand for airline tickets from City X to City Y:"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"a)\u00a0\u00a0\u00a0\u00a0\u00a0As 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.)"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"b)\u00a0\u00a0\u00a0\u00a0\u00a0Why might vacationers have a different elasticity from business travelers?"},{"insert":"\n\n"},{"attributes":{"bold":true},"insert":"Part II: 20%"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"Question One: Mathematically show that "},{"insert":"\n\n        \n  \n\u00a0  \n"},{"attributes":{"bold":true},"insert":"\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0"},{"insert":"\n\n\n"},{"attributes":{"bold":true},"insert":"Where MR is marginal revenue; \u03b5"},{"attributes":{"bold":true,"script":"sub"},"insert":"p "},{"attributes":{"bold":true},"insert":"is price elasticity of demand"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"Question Two: TV is contemplating a T-shirt advertising promotion. Monthly sales data from T-shirt shops marketing the \u201cEye Watch KRMY-TV\u201d design indicate that"},{"insert":"\n"},{"attributes":{"italic":true,"bold":true},"insert":"\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Q "},{"attributes":{"bold":true},"insert":"= 1,500 \u2013 200"},{"attributes":{"italic":true,"bold":true},"insert":"P"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"where "},{"attributes":{"italic":true,"bold":true},"insert":"Q "},{"attributes":{"bold":true},"insert":"is T-shirt sales and "},{"attributes":{"italic":true,"bold":true},"insert":"P "},{"attributes":{"bold":true},"insert":"is price."},{"insert":"\n"},{"attributes":{"bold":true},"insert":"A. How many T-shirts could KRMY-TV sell at $4.50 each?"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"B. What price would KRMY-TV have to charge to sell 900 T-shirts?"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"C. At what price would T-shirt sales equal zero?"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"D. How many T-shirts could be given away?"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"E. Calculate the point price elasticity of demand at a price of $5."},{"insert":"\n"},{"attributes":{"bold":true},"insert":"Question Three: Silkwood Enterprises specializes in gardening supplies. The demand for its new brand of fertilizer, Meadow Muffins, is given by the equation "},{"attributes":{"italic":true,"bold":true},"insert":"Q"},{"attributes":{"bold":true},"insert":" = 120 - 4"},{"attributes":{"italic":true,"bold":true},"insert":"P"},{"attributes":{"bold":true},"insert":"."},{"insert":"\n"},{"attributes":{"bold":true},"insert":"a. Silkwood is currently charging $10 for a pound of Meadow Muffins. At this price, what is the price elasticity of demand for Meadow Muffins?"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"b. At a price of $10, what is Silkwood\u2019s marginal revenue?"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"c. What price should Silkwood charge if it wishes to maximize its total revenue?"},{"insert":"\n"},{"attributes":{"bold":true},"insert":"d. At the total revenue maximizing price, what is the price elasticity of demand for Meadow Muffins?"},{"insert":"\n\n\n\n"}]}

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