The price of a plane ride rises by 10 percent. The price elasticity of demand for plane rides is 0.5 and the price elasticity of demand for train rides is 0.2. The cross elasticity of demand for train rides with respect to the price of a plane ride is 0.4.

Requirements:

1. Calculate the percentage changes in the quantity demanded of plane rides and train rides.

2. Given the rise in the price of a plane ride, what percentage change in the price of a train ride will leave the quantity demanded of train rides unchanged?

Answer rating: 100% (QA)

1 The percentage change in the quantity demanded of plane rides will be derived ... View the full answer